10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission file number 0-14938

HG HOLDINGS, INC.

(Exact name of Registrant as specified in its Charter)

Delaware	54-1272589
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2115 E. 7^th Street, Suite 101, Charlotte, North Carolina 28204

(Address of principal executive offices, Zip Code)

Registrant’s telephone number, including area code: (252) 355-4610

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.02 per share, Preferred Stock Purchase Rights

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes ☐ No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act: Yes ☐ No ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.504 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act, (check one):

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☐

Aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant based on the closing price on July 1, 2020: $13.6 million.

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock as of February 26, 2021:

Common Stock, par value $.02 per share	34,404,556
(Class of Common Stock)	Number of Shares

Documents incorporated by reference: Portions of the Registrant’s Proxy Statement for our 2021 Annual Meeting of Stockholders are incorporated by reference into Part III.

TABLE OF CONTENTS 

Part I			Page
	Item 1	Business	3
	Item 1A	Risk Factors	5
	Item 1B	Unresolved Staff Comments	9
	Item 2	Properties	9
	Item 3	Legal Proceedings	9
	Item 4	Mine Safety Disclosures	10
Part II
	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10
	Item 6	Selected Financial Data	11
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
	Item 7A	Quantitative and Qualitative Disclosures About Market Risk	16
	Item 8	Financial Statements and Supplementary Data	16
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	16
	Item 9A	Controls and Procedures	16
	Item 9B	Other Information	17
Part III
	Item 10	Directors, Executive Officers and Corporate Governance	17
	Item 11	Executive Compensation	17
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	17
	Item 13	Certain Relationships and Related Transactions, and Director Independence	18
	Item 14	Principal Accounting Fees and Services	18
Part IV
	Item 15	Exhibits, Financial Statement Schedules	18
	Item 16	10-K Summary	20
		Signatures	21
	Index to Financial Statements and Schedule		F-1

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PART I

Item 1.     Business

General

We were incorporated in Delaware in 1984. Until March 2, 2018, we were a leading design, marketing and distribution resource in the upscale segment of the wood residential furniture market.  On March 2, 2018, we sold substantially all our assets and changed our name to HG Holdings, Inc.  In this Annual Report of Form 10-K, we sometimes refer to HG Holdings, Inc. as the “Company.”  Our two executive officers are our only two employees and both part-time employees.  See Item. 1A Risk Factors for more information.

Asset Sale

On March 2, 2018, we sold substantially all of our assets (the “Asset Sale”) to Stanley Furniture Company LLC, formerly Churchill Downs LLC (“Buyer”), pursuant to the terms of the Asset Purchase Agreement, dated as of November 20, 2017, as amended by the First Amendment thereto dated January 22, 2018 (the “Asset Purchase Agreement”).    

As consideration for the Asset Sale, Buyer paid a purchase price consisting of cash in the amount of approximately $10.8 million (of which approximately $1.3 million was used to pay the outstanding amount under our credit agreement), a subordinated secured promissory note in the principal amount of approximately $7.4 million (the “Original Note”), and a 5% equity interest in Buyer’s post-closing ultimate parent company, Churchill Downs Holdings, Ltd., a British Virgin Islands business company. At the closing of the Asset Sale, Buyer acquired approximately $193,000 of cash that was on the Company’s balance sheet, resulting in the Company recording net cash received of approximately $10.6 million from the Asset Sale. The Buyer also assumed substantially all of our liabilities.

Pursuant to a stock purchase agreement dated February 7, 2019, Buyer’s British Virgin Island parent company repurchased 2,500 shares of its stock held by the Company. The Company no longer maintains an equity interest in Buyer’s British Virgin Island parent company.

Stone & Leigh Asset Sale

On September 6, 2018, the Buyer sold certain of its assets, including certain inventory and the Stone & Leigh tradename (the “S&L Asset Sale”) to Stone & Leigh, LLC (“S&L”), which is owned by a group which includes Matthew W. Smith, the Company’s former interim Chief Executive Officer.  As a part of the S&L Asset Sale, the Buyer assigned to S&L certain of its rights and obligations under the Original Note issued to the Company in March 2018 as partial consideration for the Asset Sale.  In connection with the assignment, the Company entered into an Amended and Restated Subordinated Secured promissory note with the Buyer (the “A&R Note”) with a principal amount as of the assignment date of $3.3 million and a new Subordinated Secured Promissory Note with S&L (the “S&L Note”) with a principal amount of $4.4 million as of the assignment date.  For further information on the A&R Note and S&L Note, see Note 3 of the Notes to Financial Statements in Item 1.  

Acquisition of Equity Interest in HC Government Realty Trust, Inc.

The Company has acquired an equity interest in HC Government Realty Trust, Inc., a Maryland corporation (“HC Realty”). HC Realty currently owns and operates a portfolio of 24 single-tenant properties leased entirely to the United States of America for occupancy by federal agencies including the Federal Bureau of Investigation, the Department of Veterans Affairs, the Drug Enforcement Administration, the Immigration & Customs Enforcement, the Social Security Administration and the Department of Transportation.

On March 19, 2019, we purchased 300,000 shares of HC Realty’s Common Stock (the “HC Common Stock”) for an aggregate purchase price of $3,000,000 and 200,000 shares of HC Realty’s 10.00% Series B Cumulative Convertible Preferred Stock (the “HC Series B Stock”) for an aggregate purchase price of $2,000,000.  On April 3, April 9, and June 29, 2020, the Company entered into subscription agreements with HC Realty, pursuant to which we purchased 100,000, 250,000, and 475,000 shares of Series B Stock, respectively, for an aggregate purchase price of $8,250,000.  As a result of these purchases, we currently own 36.4% of the as-converted equity interest of HC Realty; however, we do not control HC Realty as a result of our current ownership interest.

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Certain other investors, including certain investors affiliated with Hale Partnership Capital Management, LLC (“HPCM”), purchased an additional 850,000 shares of Series B Stock for an aggregate purchase price of $8,500,000 on March 19, 2019. While some of these investors have other investments with HPCM, each of these investors made a separate and direct investment in HC Realty and HPCM does not receive management fees, performance fees, or any other economic benefits with respect to these investors’ investment in HC Realty’s Series B Stock.

On March 19, 2019, we, together with certain other lenders, including certain entities affiliated with HPCM (collectively, the “Lenders”), entered into a loan agreement (the “Loan Agreement”) with HC Realty’s operating partnership, pursuant to which the Lenders provided HC Realty’s operating partnership with a $10,500,000 senior secured term loan (the “Initial Term Loan”), of which $2,000,000 was provided by us. On August 14, 2020, pursuant to the terms of the Loan Agreement, HC Realty’s operating partnership repaid the loan in full, including all accrued interest and make whole interest.

In connection with the transactions discussed above, Steven A. Hale II, our Chairman and Chief Executive Officer, was appointed to serve as HC Realty’s Chairman and Chief Executive Officer.  In addition, Mr. Hale, Brad G. Garner, our Principal Financial and Accounting Officer, and Matthew A. Hultquist, one of our former directors, were each appointed to serve as directors of HC Realty.  HC Realty’s Board of Directors is composed of five directors.

Additional information on HC Common Stock, HC Series B Stock, the Loan Agreement and HC Realty is disclosed in the Annex D in the prospectus included in our Registration Statement (No. 333-235539) on Form S-1 as amended, filed with the Securities and Exchange Commission (the “SEC”) on May 8, 2020, which Annex D is incorporated herein by reference.

Forward-Looking Statements 

Certain statements made in this report are not based on historical facts, but are forward-looking statements. These statements can be identified by the use of forward-looking terminology such as “believes,” “estimates,” “expects,” “may,” “will,” “should,” “could,” or “anticipates,” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. These statements reflect our reasonable judgment with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include the occurrence of events that negatively impact the Company’s liquidity in such a way as to limit or eliminate the Company’s ability to use proceeds from the Asset Sale to fund asset acquisitions, an inability on the part of the Company to identify a suitable business to acquire or develop with the proceeds of the Asset Sale, and the occurrence of events that negatively impact the business or assets of HC Realty and the value of our investment in HC Realty. Any forward-looking statement speaks only as of the date of this filing and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.

No assurance can be given that the actual future results will not differ materially from the forward looking statements that we make for a number of reasons including those described above and in Item IA. Risk Factors below.

Available Information

Our principal Internet address is www.hgholdingsinc.net. We make available free of charge on this web site our annual, quarterly and current reports, and amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

In addition, you may request a copy of these filings (excluding exhibits) at no cost by writing, telephoning or e-mailing us at the following address, telephone number or e-mail address:

HG Holdings, Inc.

2115 E. 7th Street, Suite 101

Charlotte, North Carolina 28204

Attention: Mr. Brad G. Garner

Telephone: 252-355-4610

Or e-mail your request to: investor@hgholdingsinc.net

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Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk. You should consider carefully the specific risk factors described below in addition to the other information contained in this Annual Report on Form 10-K, including our financial statements and related notes included elsewhere in this Annual Report on Form 10-K, before making a decision to invest in our common stock. If any of these risks actually occurs, our business, financial condition, results of operations or prospects could be materially and adversely affected. This could cause the trading price of our common stock to decline and a loss of all or part of your investment.

Material risks of the Company

We have no revenue-generating operations owned directly by the Company and have limited sources of income following the Asset Sale, which may negatively impact the value and liquidity of our common stock.

As a result of the Asset Sale, we had no revenue-generating operations and no sources of income other than payments of interest and principal under the subordinated secured promissory notes from Buyer and S&L, then remaining payments to be made to us under the Continued Dumping and Subsidy Offset Act, refundable alternative minimum tax credits, and repayment at death of premiums we have paid for a split dollar life insurance policy for a former executive officer. As of March 19, 2019, our sources of income also include dividends on HC Realty Common Stock and HC Realty Series B Stock. There can be no guarantee that suitable assets in addition to our investment in HC Realty will be available for us to purchase or that any assets acquired will generate the revenues anticipated or any revenue at all. A failure by us to secure additional sources of revenue could negatively impact the value and liquidity of our common stock.

We may not receive the amount owed us under the secured promissory note from S&L.

The S&L Note, which had an outstanding principal amount of $3.3 million as of December 31, 2020, will mature and the entire principal amount will be payable in March 2023. During 2020, we recorded an impairment loss of $833,000 on the S&L Note as a result of concluding, based on current information and events, including the impact of the novel coronavirus (“COVID-19”) on S&L’s business and its customers, that we did not believe we would be able to collect the entire amount due under the S&L Note.   S&L’s ability to make payments to us under the S&L Note may continue to be adversely impacted by the current pandemic health event resulting from COVID-19 as S&L’s operations may continue to be adversely impacted by disruptions to the supply chain and distribution channels for its products caused by this pandemic. Consequently, we may have to record additional impairment charges with respect to the S&L Note. There is no guarantee that S&L will pay us the amounts owed under the S&L Note or that, in the event of default by S&L, the collateral securing the S&L Note will be sufficient to pay the S&L Note in full.

Our business may be adversely impacted as a result of the pandemic health event resulting from COVID-19.

The pandemic health event resulting from COVID-19 has adversely impacted, and may continue to adversely impact, economic activity nationally and globally.  These economic and market conditions and other effects resulting from COVID-19 may adversely affect us.  At this point, the extent to which COVID-19 may impact us is uncertain. S&L’s ability to make payments to us under the S&L Note may continue to be adversely impacted by the current pandemic health event resulting from COVID-19 as S&L’s operations may continue to be adversely impacted by disruptions to the supply chain and distribution channels for its products caused by this pandemic. Consequently, we may have to record additional impairment charges with respect to the S&L Note. 

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We will also monitor the impact of this pandemic on our investment in HC Realty, but we are not currently anticipating a significant impact as HC Realty holds properties that are leased entirely to the United States Government for occupancy by federal agencies. Many of these federal agencies are deemed essential and continued operations amidst the various federal, state, and local restrictions aimed at slowing the spread of COVID-19. It is possible, however, that a resurgence in COVID-19 cases resulting in tighter restrictions may have the effect of heightening adverse impacts to HC Realty’s operations.

An “ownership change” could limit the use of our net operating loss carryforwards and our potential to derive a benefit from our net operating loss carryforwards.

If an “ownership change” occurs pursuant to applicable statutory regulations, we are potentially subject to limitations on the use of our net operating loss carryforwards which in turn could adversely impact our potential to derive a benefit from our net operating loss carryforwards. While we have entered into a rights agreement designed to preserve and protect our net operating loss carryforwards, there is no guarantee that the rights agreement will prevent us from experiencing an ownership change and, therefore, having a limitation on our ability to use our net operating loss carryforwards. In general, an “ownership change” would occur if there is a cumulative change in the ownership of our common stock of more than 50% by one or more “5% shareholders” during a three-year test period.

Failure to successfully identify, acquire and, to the extent applicable, operate non-furniture related assets could cause our stock price to decline.

Following the closing of the Asset Sale, we began evaluating alternatives for using cash proceeds from the Asset Sale to acquire non-furniture related assets. We have not acquired any assets other than the equity interest we acquired in HC Realty and we may not be able to acquire other profitable assets. In addition, any assets that we do acquire, including our equity interest in HC Realty, may not be profitable. If we are not successful in identifying, acquiring and, to the extent applicable, operating non-furniture related assets, our stock price may decline.

We will likely have no operating history in the business of non-furniture related assets to be acquired, and therefore, with respect to certain assets, we will be subject to the risks inherent in establishing a new line of business.

Other than the equity interest we acquired in HC Realty, we have not acquired any additional assets or the line or lines of business to which any such assets may relate and, therefore, cannot fully describe the specific risks presented by an acquisition of such assets. It is likely that we will have had no operating history in the line of business of any such assets to be acquired, and it is possible that any such assets that we may acquire will have a limited operating history in their business. Accordingly, to the extent we acquire any such assets, our future success may in part be subject to the risks, expenses, problems and delays inherent in establishing a new line of business and the ultimate success of such new business cannot be assured. In addition, prior to March 2019, our management did not have prior experience relating to the operations of a real estate investment trust (“REIT”) such as HC Realty and the ultimate success of our investment in HC Realty cannot be assured.

Resources may be expended in researching potential acquisitions that might not be consummated.

The investigation of non-furniture company assets to acquire and the negotiation, drafting and execution of relevant agreements and other documents will require substantial management time and attention in addition to potentially incurring legal and other professional expenses. If a decision is made not to complete a specific acquisition, the costs incurred up to that point for the proposed transaction likely would not be recoverable. As of December 31, 2020 and 2019, we had incurred $0 and $10,000, respectively, of such related expenses. Furthermore, even if an agreement is reached relating to a specific acquisition, we may fail to consummate the acquisition for any number of reasons including those beyond our control.

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We may be required to register under the Investment Company Act of 1940.

Under Section 3(a)(l) of the 1940 Act, an issuer is deemed to be an investment company if it is engaged in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. The 1940 Act defines “investment securities” broadly to include virtually all securities except U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves regulated or exempt investment companies. Consequently, the A&R Note (while it was outstanding) and S&L Note, as well as the securities of HC Realty we hold, may be considered investment securities and we may fall within the scope of Section 3(a)(1)(C) of the 1940 Act.

A company that falls within the scope of Section 3(a)(1)(C) of the 1940 Act can avoid being regulated as an investment company if it can rely on certain of the exclusions or exemptions under the 1940 Act. One such exclusion is Rule 3a-2 under the 1940 Act, which temporarily relieves certain issuers that are in transition to a non-investment company business from regulation under the1940 Act (a “transient investment company”). The rule provides a one-year safe harbor for a company to comply with another exemption or exclusion under the 1940 Act provided that the company has a bona fide intent to be primarily engaged in a business other than that of investing, reinvesting, owning, holding or trading in securities. The one-year grace period started on the date of the Asset Sale, which was March 2, 2018, and ended on March 2, 2019. We did not acquire sufficient assets within one year from closing the Asset Sale as contemplated by Rule 3a-2. There is no assurance that we will not be deemed subject to the 1940 Act and be required to register as an investment company.

While in transient investment company status, we actively pursued alternatives for using cash proceeds from the Asset Sale for the acquisition of non-furniture related assets and acquired an equity interest in HC Realty on March 19, 2019. On April 3, 2020, we used $1.0 million of our cash to purchase an additional 100,000 shares of HC Realty Series B Stock. On April 29, 2020, we used an additional $2.5 million of our cash to purchase an additional 250,000 shares of HC Realty Series B Stock.  On June 29, 2020, we used $4.75 million of the cash proceeds from the Rights Offering to purchase an additional 475,000 shares of HG Realty Series B Stock. As a result of these purchases, we now own approximately 37.0% of the as-converted equity interest in HC Realty. We believe that these additional purchases allow us to rely on the exemption from investment company registration set forth in Rule 3a-1 of the 1940 Act because we own (i) at least 25% of the HC Realty Common Stock on an as-converted basis, resulting in us being presumed to control HC Realty within the meaning of Section 2(a)(9) of the 1940 Act and (ii) a sufficient number of shares of HC Realty Series B Stock so that we primarily control HC Realty within the meaning of Rule 3(a)-1 of the 1940 Act.

The Company has not sought or obtained an exemptive order, no-action letter or any other assurances from the SEC or its staff regarding the Company’s ability to rely on Rule 3a-2 or Rule 3a-1 of the 1940 Act, nor has the SEC or its staff provided any such order, no-action letter or other assurances. If we are required to register under the 1940 Act, compliance with these additional regulatory burdens would significantly increase our operating expenses. Registered investment companies are subject to extensive, restrictive and potentially adverse regulation relating to, among other things, operating methods, management, capital structure, dividends and transactions with affiliates.

Other risks specific to our investment in HC Realty

Our investment in HC Realty may lose value.

In connection with using cash proceeds from the Asset Sale to acquire non-furniture related assets, we acquired an equity interest in HC Realty on March 19, 2019 by purchasing HC Common Stock and HC Series B Stock. We acquired additional HC Series B Stock on April 3, April 29, and June 29, 2020.  As a result of these stock purchases, we currently own 36.4% of the as-converted equity interest of HC Realty. There is no guarantee that HC Realty will be successful implementing its business strategy for the acquisition, management and disposition of GSA properties and as a result our HC Common Stock and HC Series B Stock may lose value.

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The value of our equity investment in HC Realty would be adversely affected if HC Realty failed to qualify as a REIT.

HC Realty has elected to be treated as a REIT for U.S. federal income tax purposes. Its continued qualification as a REIT depends on its satisfaction of certain asset, income, organizational, distribution and stockholder ownership requirements on a continuing basis. Its ability to satisfy some of the asset tests depends upon the fair market values of its assets, some of which are not able to be precisely determined and for which HC Realty has indicated it will not obtain independent appraisals. If HC Realty fails to qualify as a REIT in any taxable year, and certain statutory relief provisions are not available, HC Realty would be subject to U.S. federal income tax on its taxable income at regular corporate rates and distributions to stockholders would not be deductible by it in computing its taxable income. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution. Unless entitled to relief under certain Internal Revenue Code provisions, HC Realty also would be disqualified from taxation as a REIT for the four taxable years following the year during which HC Realty ceased to qualify as a REIT. In addition, if HC Realty fails to qualify as a REIT, HC Realty will no longer be required to make distributions. As a result of all these factors, HC Realty’s failure to qualify as a REIT could impair its ability to expand business and raise capital and could adversely affect the value of our HC Common Stock and HC Series B Stock.

Risks related to our common stock

Our common stock is listed on the OTCQB and there may be limited ability to trade our common stock.

Trading of our common stock is currently conducted in the over-the-counter market on the OTCQB, which is generally a less active, and therefore a less liquid, trading market than other types of markets such as stock exchanges. As a result, an investor may find it more difficult to dispose of, or obtain accurate quotations for the price of, our common stock than if our stock was traded on other markets.

Our common stock may be deemed a “penny stock.”

Our common stock may be considered a “penny stock” as defined in the Exchange Act and the rules thereunder, unless the price of our shares of common stock is at least $5.00. We expect that our share price will remain less than $5.00. Unless our common stock is otherwise excluded from the definition of “penny stock”, the penny stock rules apply. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker dealer and its sales person in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that the broker dealer, not otherwise exempt from such rules, must make a special written determination that the penny stock is suitable for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure rules have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. So long as our common stock is subject to the penny stock rules, the level of trading activity could be limited and it may be difficult for investors to sell our common stock.

Risks related to our management

Our executive officers and some of our current and former directors may have potential or actual conflicts of interest because of their positions with HCPM and HC Realty

Steven A. Hale II, our Chairman and Chief Executive Officer, is sole manager of HPCM which serves as the investment adviser for the Hale Funds and two current holders of HC Realty Series B Stock.  The Hale Funds own approximately 33.8% of our outstanding common stock. We also own HC Realty Series B Stock and HC Realty Common Stock. Mr. Hale also serves as Chairman and Chief Executive Officer and a director of HC Realty.  Bradley G Garner, our Principal Financial and Accounting Officer, also serves as a director of HC Realty and is chief compliance officer for HPCM.  Matthew A. Hultquist, one of our former directors, also serves as a director of HC Realty and is a part time employee of HC Realty serving as Senior Vice President - Acquisitions.

Mr. Hale and Mr. Garner owe fiduciary duties to us, as well as to HC Realty as a result of their positions with HC Realty and to the Hale Funds and two current holders of HC Realty Series B Stock as a result of their positions with HPCM, the investment adviser to these parties.  Mr. Hultquist used to owe fiduciary duties to us and currently owes such duties to HC Realty.  As a result, these executive officers and current and former directors may have potential or actual conflicts of interest when faced with decisions that could have different implications for us and HC Realty.  In addition, Mr. Hale and Mr. Garner may have potential or actual conflicts of interest when faced with decisions that could have different implications for us and the Hale Funds or the two holders of HC Realty Series B Stock advised by HPCM.  For example, these potential conflicts could arise over matters such as funding and capital matters.

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Our executive officers, directors and 10% stockholders have significant voting power and may vote their shares in a manner that is not in the best interest of other stockholders.

Our current executive officers, directors and 10% stockholders control approximately 75.8% of the voting power represented by our outstanding common stock. If these stockholders act together, they may be able to exert significant control over our management and affairs requiring stockholder approval, such as the election of directors or the dissolution of the company. This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of our common stock. This concentration of ownership may not be in the best interests of all our stockholders.

Our management, who will be employed on a part-time basis for the foreseeable future, currently has outside business interests that will require their time and attention and may interfere with their ability to devote all of their time to our business, which may adversely affect our business and operations.

Since our business will be limited until we find suitable non-furniture assets for acquisition, our only employees consist of our two executive officers, who will be employed for the foreseeable future on a part-time basis and who have outside business interests that could require substantial time and attention. Our executive officers are associated with Hale Partnership Capital Management LLC and devote significant time to its affairs. Our executive officers are also associated with HC Realty. On March 19, 2019, we acquired an equity interest in HC Realty and made a loan to HC Realty’s operating partnership. We cannot accurately predict the amount of time and attention that will be required of our officers to perform their ongoing duties related to outside business interests. The inability of our officers to devote sufficient time to managing our business could have a material adverse effect on our business and operations.

Item 1B.     Unresolved Staff Comments

None.

Item 2.      Properties

Our corporate headquarters is located in Charlotte, North Carolina where we lease approximately 1,200 square feet of office space.

Item 3.     Legal Proceedings

Hollie Drive Litigation   

In November 2019, we received notice that the Company and the Buyer were defendants in a pending case in the Circuit Court for Henry County, Virginia.  The case, which had been instituted on September 18, 2019 by Hollie Drive Associates, LLC (“Hollie”), raises issues arising from the purported breach of a lease for warehouse space in Henry County, Virginia, which is owned by Hollie and was previously rented by the Company.  The relevant lease was assigned to the Buyer in connection with the Asset Sale.  The complaint asserts that the Buyer breached various provisions of the lease including failure to make certain rental payments and failure to pay for certain clean-up and reconstruction after the Buyer vacated the property. The complaint seeks damages in the amount of approximately $555,000 and attorney’s fees.  Hollie named the Company as a party because the Company was the original tenant under the lease.   Under the Asset Purchase Agreement, the Buyer agreed to assume and indemnify the Company against post-closing liabilities arising under the lease including those asserted in the complaint.  The Buyer’s filings in the case do not dispute the obligation to indemnify the Company for any damages awarded in the case.  Based upon discussions with the Buyer and documents produced to date by Hollie, it appears Hollie has asserted damages greatly exceeding the likely recovery in the case.  Given the relatively low damages amount and the Buyer’s indemnity obligation, the Company believes it is not probable the case will result in a material adverse effect on its financial statements.

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Graham County Property Litigation

As previously disclosed, on November 26, 2019, Graham County (the “County”), North Carolina filed a complaint against the Company and the Buyer in the Superior Court for Graham County, North Carolina asserting claims arising out of a conveyance to the County of approximately 36 acres (the “Property”) in November 2014.   The Complaint sought, among other things, (i) rescission of the conveyance of the Property to the County, (ii) reimbursement of expenses incurred by the County in connection with the Property, (iii) to invalidate the indemnity agreements entered into in connection with the conveyance, (iv) and other damages, or (iv), in the alternative to rescinding the conveyance, expenses necessary to make the Property suitable and useable for a public park and outdoor recreation area. Pursuant to the Asset Purchase Agreement, the Buyer agreed to assume and indemnify the Company against certain pre-closing liabilities including those relating to the conveyance of the Property. After the filing of the complaint, the Company entered into an agreement with the Buyer providing that, if the Company reaches a settlement with the County resulting in transfer of the Property back to the Company, then the Company can retain the Property notwithstanding provisions of the Asset Purchase Agreement and will waive any right to indemnification from the Buyer with respect to the claims by the County with respect to the Property. In January 2021, representatives of the Company and the County reached an agreement to resolve all claims asserted by the County in the litigation.  Under the terms of the agreement, the County has agreed to transfer the Property back to the Company, lease a portion of the Property from the Company, and dismiss the litigation in exchange for Company making cash payments to the County in a total amount that is immaterial to the Company’s financial performance.

Item 4.     Mine Safety Disclosures

Not Applicable.

Information about our Executive Officers

Our executive officers who are elected annually and their ages as of January 1, 2021 are as follows:

Name	Age	Position
Steven A. Hale II	37	Chairman, Chief Executive Officer and Director
Brad G. Garner	38	Principal Financial and Accounting Officer

Steven A. Hale II is the founder of Hale Partnership Capital Management, LLC, an asset management firm that serves as the investment manager to certain privately held investment partnerships. Mr. Hale has held his position since 2010. From 2007 to 2010, prior to founding Hale Partnership Capital Management, LLC, Mr. Hale was an associate director with Babson Capital Management, LLC, an asset management firm, where he had responsibility for coverage of distressed debt investments across a variety of industries. From 2005 to 2007, Mr. Hale was a leveraged finance analyst with Banc of America Securities. Mr. Hale has served as a director of the Company since February 2017, as Chairman of the Company’s Board of Directors since November 2017 and an officer of the Company since March 2018.

Brad G. Garner joined Hale Partnership Capital Management, LLC, an asset management firm that serves as the investment manager to certain privately held investment partnerships, in 2015 as Chief Financial Officer and Partner.   Mr. Garner served as Chief Financial Officer of Best Bar Ever, Inc. while raising and structuring capital investments and successful exit to a strategic partner. Prior to taking on that role, he spent 10 years in public accounting at Dixon Hughes Goodman LLP.  Mr. Garner has served as an officer of the Company since April 2018.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Prices

Our common stock is traded in the over-the-counter market on the OTCQB under the symbol “STLY”.  Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

As of February 1, 2021, we had approximately 825 beneficial stockholders.

Issuer Purchases of Equity Securities

None.

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Equity Compensation Plan Information

The following table summarizes our equity compensation plans as of December 31, 2020:

	Number of shares	Weighted-average	Number of shares
	to be issued upon	exercise price	remaining available
	exercise of	of outstanding	for future issuance
	outstanding options,	options, warrants	under equity
	warrants and rights	and rights	compensation plans
Equity compensation plans approved by stockholders	-	-	1,186,429

Item 6. Selected Financial Data

Not required to be provided by a smaller reporting company. 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

On March 2, 2018, we sold substantially all of our assets to Churchill Downs LLC, pursuant to the terms of the Asset Purchase Agreement, dated as of November 20, 2017, as amended by the First Amendment thereto dated January 22, 2018. As consideration for the Asset Sale, Buyer paid a purchase price consisting of cash in the amount of approximately $10.8 million (of which approximately $1.3 million was used to pay the outstanding amount under our credit agreement), a subordinated promissory note in the principal amount of approximately $7.4 million, and a 5% equity interest in Buyer’s post-closing ultimate parent company, Churchill Downs Holdings Ltd., a British Virgin Islands business company. Buyer also assumed substantially all of our liabilities.

On September 6, 2018, the Buyer sold certain of its assets, including certain inventory and the Stone & Leigh tradename (the “S&L Asset Sale”) to Stone & Leigh, LLC (“S&L”), which is owned by a group which included Matthew W. Smith, the Company’s former interim Chief Executive Officer. As a part of the S&L Asset Sale, the Buyer assigned to S&L certain of its rights and obligations under the original $7.4 million subordinated secured promissory note issued (the “Original Note”) to the Company in March 2018 as partial consideration for the Asset Sale. In connection with the assignment, the Company entered into an Amended and Restated Subordinated Secured promissory note with the Buyer (the “A&R Note”) with a principal amount as of the assignment date of $3.3 million and a new Subordinated Secured Promissory Note with S&L (the “S&L Note”) a principal amount of $4.4 million as of the assignment date.

On February 7, 2019, the Company, Buyer and related parties entered into a Consent, Reaffirmation, and Joinder (the “Consent”) in connection with a new senior credit facility that Buyer expected to enter into with Alterna Capital Solutions, LLC (“Alterna”).  Pursuant to the Consent, Buyer paid $180,000 of principal and accrued interest under the A&R Note as provided in the Consent and Buyer delivered a Seconded Amended and Restated Subordinated Secured Promissory Note (the “Second A&R Note”) in favor of the Company. The Second A&R Note has a principal amount of $3,201,536 and remains payable no later than March 2, 2023, at which time the total principal amount is due. Interest on the principal balance of the note continues to accrue daily at an annual fixed rate of 6%. The other terms of the Second A&R Note are substantially the same as those of the A&R Note. The Second A&R Note also remains guaranteed by Stanley Intermediate Holdings LLC, formerly Churchill Downs Intermediate Holdings LLC. Pursuant to the Consent, Buyer’s British Virgin Island parent company has also guaranteed the Second A&R Note.

Pursuant to a stock purchase agreement dated February 7, 2019, Buyer’s British Virgin Island parent company repurchased 2,500 shares of its stock held by the Company. The Company no longer maintains an equity interest in Buyer’s British Virgin Island parent company. The Company recorded a gain on the sale of the stock of $120,000 during the three months ended March 31, 2019.

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The Company acquired an equity interest in HC Government Realty Trust, Inc., a Maryland corporation (“HC Realty”).  HC Realty currently owns and operates a portfolio of 20 single-tenant properties leased entirely to the United States of America for occupancy by federal agencies including the Federal Bureau of Investigation, the Department of Veterans affairs, the Drug Enforcement Administration, Immigration & Customs Enforcement, the Social Security Administration and the Department of Transportation. On March 19, 2019, we purchased 300,000 shares of HC Realty’s Common Stock (the “HC Common Stock”) for an aggregate purchase price of $3,000,000 and 200,000 shares of HC Realty’s 10.00% Series B Cumulative Convertible Preferred Stock (the “HC Series B Stock”) for an aggregate purchase price of $2,000,000.  On April 3, April 9, and June 29, 2020, the Company entered into subscription agreements with HC Realty, pursuant to which we purchased 100,000, 250,000, and 475,000 shares of Series B Stock, respectively, for an aggregate purchase price of $8,250,000. As a result of these purchases, we currently own approximately 36.4% of the as-converted equity interest of HC Realty.

On March 19, 2019, the Company, together with certain other Lenders, entered into a loan agreement (the “Loan Agreement”) with HC Realty’s operating partnership, and HCM Agency, LLC, as collateral agent (the “Agent”), pursuant to which the Lenders provided HC Realty’s operating partnership with a $10,500,000 senior secured term loan (the “Initial Term Loan”), of which $2,000,000 was provided by the Company. On August 14, 2020, pursuant to the terms of the Loan Agreement, HC Realty’s operating partnership repaid the loan in full, including all accrued interest and make whole interest.

On October 31, 2019, the Company entered into a Forbearance Agreement (the “Forbearance Agreement”) with the Buyer pursuant to which the Company has agreed to forbear from exercising its rights and remedies under Second A&R Note until February 24, 2020 or earlier in the event of (i) a default or (ii) breach of the Forbearance Agreement by the Buyer. Under the Forbearance Agreement, the Buyer agreed to pay the Company $220,000 on November 1, 2019 (the “Effective Date”), $200,000 on or before the 30th day following the Effective Date, $150,000 on or before the 60th day following the Effective Date, and $130,000 on or before the 90th day following the Effective Date. As of December 31, 2019, the Buyer had made all scheduled payments under the Forbearance Agreement. The Company collected $750,000 of principal repayments on the Second A&R Note during the twelve months ended December 31, 2019.

On February 24, 2020, the Company and the Loan Parties entered into a letter agreement (the “Forbearance Extension Letter Agreement”) extending the outside termination date for the forbearance period under the Forbearance Agreement from February 24, 2020 to February 26, 2020. The other terms and conditions of the Forbearance Agreement remained the same.  The forbearance period terminated on February 26, 2020 under the terms of the Forbearance Extension Letter Agreement and Forbearance Agreement.

The Company received prepayments on February 28, 2020 and March 4, 2020 of $200,000 and $350,000, respectively, of the principal amount on the Second A&R Note from the Buyer.

On March 6, 2020, the Company and the Loan Parties entered into a letter agreement (the “Second Forbearance Extension Letter Agreement”) extending, subject to certain conditions, the outside termination date from February 26, 2020 to March 17, 2020. The extension of the outside termination and the effectiveness of the Second Forbearance Extension Letter Agreement is conditioned on Buyer making payments to be applied to the outstanding principal balance of the Second A&R Note of $250,000 on or before March 12, 2020 and $750,000 on or before March 13, 2020.  The Second Forbearance Extension Letter Agreement also required Buyer to make an additional $391,970 payment on or before March 17, 2020 which would be applied to the outstanding principal balance of the Second A&R Note. The other terms and conditions of the Forbearance Agreement remained the same. 

On March 12 and 13, 2020, the Company received payments from Buyer of $250,000 and $750,000, respectively, pursuant to the Second Forbearance Extension Letter Agreement which payments were applied to the outstanding principal amount of the Second A&R Note. 

On March 16, 2020, the Company received payment of $392,000 from the Buyer resulting in satisfaction in full of the Second A&R Note pursuant to the terms of the Forbearance Agreement as amended.  As a result of the payments received from Buyer in January, February, and March of 2020 on the Second A&R Note, the Company recognized a gain of $1.3 million on the payoff of the Second A&R Note during the first quarter of 2020.

As a result of these actions taken on the subordinated secured promissory notes, during the year ended December 31, 2020 and 2019 the Company received approximately $2.1 million and $750,000, respectively, of principal repayments on the Second A&R Note.   The Company received principal repayments on the S&L note during the year ended December 31, 2020 and 2019 of approximately $58,000 and $1 million, respectively. 

On June 19, 2020, the Company raised $12,675,000, the maximum gross proceeds possible, through its rights offering (the “Rights Offering”) which concluded on June 19, 2020. Pursuant to the Rights Offering, the Company distributed non-transferable rights to purchase 19,500,000 shares of its common stock at a purchase price of $0.65 per share to stockholders of record as of May 18, 2020. As a result of the rights offering, the Company issued 19,500,000 new shares of common stock.

The Company continues to pursue acquisition opportunities which will allow us to potentially derive benefit from the Company’s net operating loss carryforwards.

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Results of Operations

2020 Compared to 2019

As of December 31, 2020, our sources of income include dividends on HC Common Stock and HC Series B Stock, and interest paid on cash and the subordinated secured promissory note to S&L. The Company believes that the revenue generating from these sources in addition to the cash on hand is sufficient to fund operating expenses for at least 12 months from the date of these financial statements.

The Company generated interest income of $0.6 million for the year ended December 31, 2020 as compared to $1.0 million for the year ended December 31, 2019.  The decrease was primarily a result of decreased interest income from the Second A&R Note pursuant to the Forbearance Agreement and payoff of that note in March 2020, decreased interest income from the HC Realty Loan Agreement as a result of the payoff of that note in August 2020, ceasing to accrete interest income on the S&L Note in September 2020, and lower interest rates on our cash deposits.  Interest income for the year ended December 31, 2020 consisted of $26,000 of cash interest income on our cash deposits and income tax receivable, $249,000 of interest on the S&L Note from S&L, $204,000 of cash interest on the Loan to Affiliate, $25,000 of paid in kind interest income on the Second A&R Note from Buyer and $104,000 of accreted interest income on the fair value adjustment to the S&L Note.  The Company generated dividend income of $684,000 for the year ended December 31, 2020 as compared to $157,000 for the prior year.  The increase resulted primarily from the April 3, April 29, and June 29, 2020 acquisitions of additional HC Realty Series B Stock.  During the three month period ended March 31, 2020, the Company received payments from Buyer of $2 million, in aggregate, pursuant to the Forbearance Agreement, the First Forbearance Extension Letter Agreement, and the Second Forbearance Extension Letter Agreement.  The payments were applied to the outstanding principal amount of the Second A&R Note resulting in satisfaction in full of the Second A&R Note pursuant to the terms of the Forbearance Agreement as amended.  As a result of the payments received on the Second A&R Note, the Company recognized a gain of $1.3 million on the payoff of the Second A&R Note during the year ended December 31, 2020. The Company recorded an impairment loss of $833,000 during the year ended December 31, 2020 on the S&L Note as a result of concluding, based on current information and events, including the impact of COVID-19 on S&L’s business and its customers, the Company did not believe it would be able to collect the amount due under the S&L Note and the note was other than temporarily impaired. The Company also recognized a Loss from Affiliate of $0.4 million during both 2020 and 2019 related to the Company’s investment in HC Realty’s common stock that is accounted for under the equity method.

General and administrative expenses of $1.3 million for the year ended December 31, 2020 as compared to $1.1 million for the year ended December 31, 2019.  The increase was primarily due to an increase in legal and professional fees incurred in connection with the Company’s registration statement and amendments with respect to the Rights Offering.  General and administrative expenses for the year ended December 31, 2020 consisted of $570,000 of professional fees, $265,000 of wages, $82,000 of other fees and expenses primarily related to proxy and annual meeting voting and the Company’s registration statement, $78,000 of insurance expense, $83,000 of stock based compensation expense, $40,000 of franchise tax expense, and $184,000 of other operating expenses.  Included in these expenses were one-time legal and professional, printing, and other administrative fees during the year ended December 31, 2020 of $372,000 specifically related to the Company’s registration statement and amendments with respect to the completed Rights Offering.

Our effective tax rate for the year ended December 31, 2020 was effectively 0% due to our net operating loss carryforwards.  Our 2019 effective tax rate was (97.6)% resulting from a tax benefit from unrecognized tax benefits position under FIN 48.

Financial Condition, Liquidity and Capital Resources

Sources of liquidity include cash on hand, cash interest earned on our cash on hand and the S&L Note and dividends from our HC Realty common and Series B Stock. We expect cash on hand to be adequate for ongoing operational expenditures for at least 12 months from the date of these financial statements.  At December 31, 2020, we had $11.4 million in cash and $234,000 in restricted cash.  A portion of our unrestricted and restricted cash is currently held in savings accounts earning approximately 0.05%.  We also received quarterly dividends on our HC Realty common and Series B Stock at annual rates of 5.5% and 10%, respectively. See Note 11 of the Notes to the Financial Statements for a discussion of uncertainties related to COVID-19.

Cash provided by operations was $290,000 in 2020 as compared to $1.4 million in 2019. The decrease was primarily a result of decreased interest income from the Second A&R Note pursuant to the Forbearance Agreement and payoff of that note in March 2020, decreased interest income from the HC Realty Loan Agreement as a result of the payoff of that note in August 2020, and $1.2 million of one-time CDSOA escrow distributions received in 2019. Cash provided by operations for the year ended December 31, 2020 consisted of $479,000 of cash interest income received, $165,000 of dividends on our HC Realty common stock, $477,000 of dividends on our HC Realty Series B Stock, and $494,000 of income tax refund offset by $1.6 million of payments to employees and suppliers. The payments to employees and suppliers primarily consisted of $288,000 of wages and payroll expenses to current management, $715,000 of legal and professional fees, $51,000 of proxy and Rights Offering printing and other fees, and $60,000 of insurance premiums.

Cash used by investing activities in 2020 consisted of the Company’s investment in HC Series B Stock of approximately $8.3 million offset by cash principal payments received on the subordinated secured promissory notes of approximately $2.1 million and principal payments on the Loan Agreement of $2.0 million.

13

Cash provided by financing activities for year ended December 31, 2020 consisted of proceeds from the issuance of the Company’s common stock in the Rights Offering of approximately $12.7 million.

Continued Dumping and Subsidy Offset Act (“CDSOA”)

The CDSOA provides for distribution of monies collected by U.S. Customs and Border Protection (“Customs”) for imports covered by antidumping duty orders entering the United States through September 30, 2007 to eligible domestic producers that supported a successful antidumping petition (“Supporting Producers”) for wooden bedroom furniture imported from China. Antidumping duties for merchandise entering the U.S. after September 30, 2007 have remained with the U.S. Treasury.

There were no distributions of collected duties to the Company in 2020 or 2019.

As the CDSOA distributed monies collected by Customs to eligible domestic producers that supported a successful antidumping petition (“Supporting Producers”), a portion of the proceeds were retained and held in an escrow account in order to fund future expenses (such as professional fees) related to the petition. During the first quarter of 2019, the Supporting Producers group decided, based on the current facts and circumstances of the petition, to disburse the portion of those funds related to the 2013, 2014, and first half of 2015 distributions. The Company’s share of the escrow release was approximately $1.2 million, which we received on March 15, 2019. The group of Supporting Producers expect that any remaining funds held in escrow will be used for future expenses related to the petition. The Company does not expect any future disbursements related to these escrow funds.

New Accounting Pronouncements 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).  The amendments in ASU 2016-13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.  The amendment is effective for public entities for annual reporting periods beginning after December 15, 2022, however early application is permitted for reporting periods beginning after December 15, 2018.  The Company does not anticipate the adoption of ASU 2016-13 to have a material impact to the financial statements.

Critical Accounting Policies

We have chosen accounting policies that are necessary to accurately and fairly report our operational and financial position.  Below are the critical accounting policies that involve the most significant judgments and estimates used in the preparation of our financial statements.

Equity Investments - Long-term investments consist of investments in equity securities where our ownership is less than 50% and the Company has the ability to exercise significant influence, but not control, over the investee.  These investments are classified in “Investment in affiliate” on the balance sheets.  Investments accounted for under the equity method of accounting are initially recorded at cost and subsequently increases or decreases the investment by its proportionate share of the net income or loss and other comprehensive income or loss of the investee. For investments that do not have readily determinable fair values, the Company made an accounting policy election for a measurement alternative.  Upon adoption of ASU 2016-01, the Company carries these investments at cost minus impairment, if any, plus or minus any changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. 

14

If the Company believes a decline in market value below cost is other than temporary, a loss is charged to earnings, which establishes a new cost basis for the security.  The Company determination of whether an equity investment is other than temporarily impaired incorporates both quantitative and qualitative information.  The Company considers a number of factors including, but not limited to, the length of time and the extent to which the fair value has been less than cost, the length of time expected for recovery, the financial condition of the investee, the reason for decline in fair value, the ability and intent to hold the investment to maturity, and other factors specific to the individual investment.

Note Receivable - In accordance with ASC 810-40-5, upon the sale of substantially all of the assets the Company recorded a gain on the deconsolidation of a group of assets based on the difference between the fair value of the consideration received and the carrying amount of the group of assets. As the Original Note was part of the consideration received, the Company recorded the Original Note at its fair value on March 2, 2018. The fair value of the Original Note was estimated using discounted cash flow analyses, using market rates at the acquisition date that reflect the credit and inherent rate-risk inherent in the Original Note. The discount resulting from the fair value adjustment was recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method. As of the date of the assignment and transfer from the Buyer to S&L, it was determined that the Original Note was extinguished and therefore both the A&R Note and the S&L Note were measured based on their fair value in accordance with Emerging Issues Task Force (EITF) – Creditors Accounting for Modification or Exchange of Debt Instruments.  The discounts resulting from the fair value adjustments for the A&R Note and the S&L Note were recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method.  When impairment is determined to be probable, the measurement will be based on the fair value of the collateral securing the notes.  The determination of impairment involves management’s judgment and the use of market and third-party estimates regarding collateral values.

The Company concluded, based on current information and events, including the impact of COVID-19 on S&L’s business and its customers, that the Company did not believe it would be able to collect the amount due under the S&L Note and determined that the note was other than temporarily impaired. The evaluation was generally based on an assessment of the borrower’s financial condition and the adequacy of the collateral securing the S&L Note. Given the facts and circumstances, the Company recorded an impairment loss of $833,000 during the year ended December 31, 2020. The Company further ceased accruing interest and accreting interest income on the fair value discount of the S&L Note on the date in the third quarter of 2020 it determined the note was other than temporarily impaired

Variable Interest Entities (“VIE”) - As a result of both the Asset Sale and the S&L Asset Sale, we have a variable interest in two entities that have been determined to be variable interest entities ("VIE"). If we conclude that we are the primary beneficiary of a VIE, we are required to consolidate it. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of significant activities and an assessment of our ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding, financing, and other applicable agreements and circumstances. Our assessments of whether we are the primary beneficiary of our VIE requires significant assumptions and judgments. We have concluded that we are not the primary beneficiary of the two VIEs as we do not have the power to direct the activities that most significantly impact the VIEs’ economic performance and therefore are not required to consolidate these entities.

Interest Income – Interest income is recorded on an accrual basis based on the effective interest rate method to the extent that we expect to collect such amounts.

15

Deferred taxes - We recognize deferred tax assets and liabilities based on the estimated future tax effects of differences between the financial statements and the tax basis of assets and liabilities given the enacted tax laws.  We evaluate the need for a deferred tax asset valuation allowance by assessing whether it is more likely than not that the company will realize its deferred tax assets in the future.  The assessment of whether or not a valuation allowance is required often requires significant judgment, including the forecast of future taxable income. Adjustments to the deferred tax valuation allowance are made to earnings in the period when such assessment is made.

In preparation of our financial statements, we exercise judgment in estimating the potential exposure to unresolved tax matters and apply a more likely than not criteria approach for recording tax benefits related to uncertain tax positions. While actual results could vary, we believe we have adequate tax accruals with respect to the ultimate outcome of such unresolved tax matters.

Long-lived assets - Property, plant and equipment is reviewed for possible impairment when events indicate that the carrying amount of an asset may not be recoverable. Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived assets, which could result in impairment charges in future periods that would lower our earnings. Our depreciation policy reflects judgments on the estimated remaining useful lives of assets.

Accruals for self-insurance reserves - Accruals for self-insurance reserves (including workers’ compensation and employee medical) are determined based on a number of assumptions and factors, including historical payment trends and claims history, actuarial assumptions and current and estimated future economic conditions. These estimated liabilities are not discounted. If actual trends differ from these estimates, the financial results could be impacted. Historical trends have not differed materially from these estimates.

Stock-Based Compensation - We record share-based payment awards at fair value on the grant date of the awards, based on the estimated number of awards that are expected to vest, over the vesting period. The fair value of stock options was determined using the Black-Scholes option-pricing model. The fair value of the restricted stock awards was based on the closing price of the Company’s common stock on the date of the grant. For awards with performance conditions, we recognize compensation cost over the expected period to achieve the performance conditions, provided achievement of the performance conditions are deemed probable.

Off-Balance Sheet Arrangements 

We do not have transactions or relationships with “special purpose” entities, and we do not have any off-balance sheet financing other than normal operating leases for office space.

Item 7A.     Quantitative and Qualitative Disclosures about Market Risk

Not required to be provided by a smaller reporting company.

Item 8.     Financial Statements and Supplementary Data

The financial statements and schedule listed in item 15(a) (1) hereof are incorporated herein by reference and are filed as part of this report.

Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.     Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act).  Based on this evaluation, our principal executive officer and our principal financial officer concluded our disclosure controls and procedures were effective as of December 31, 2020, the end of the period covered by this Annual Report. 

16

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.     Other Information

None.

PART III

Item 10.     Directors, Executive Officers and Corporate Governance

Information related to our directors is set forth under the caption “Election of Directors” of our proxy statement (the “2021 Proxy Statement”) for our 2021 annual meeting of shareholders. Such information is incorporated herein by reference.

Information relating to compliance with section 16(a) of the Exchange Act is set forth under the caption “Delinquent Section 16(a) Reports” of our 2021 Proxy Statement and is incorporated herein by reference.

Information relating to the Audit Committee and Board of Directors’ determinations concerning whether a member of the Audit Committee of the Board is a “financial expert” as that term is defined under Item 407(d) (5) of Regulation S-K is set forth under the caption “Board and Board Committee Information” of our 2021 Proxy Statement and is incorporated herein by reference.

Information concerning our executive officers is included in Part I of this report under the caption “Information about our Executive Officers.”

We have adopted a code of ethics that applies to our associates, including the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our code of ethics is posted on our website at www.hgholdingsinc.net. Amendments to and waivers from our code of ethics will be posted to our website when permitted by applicable SEC rules and regulations.

Item 11.    Executive Compensation

Information relating to our executive compensation is set forth under the caption “Executive Compensation” of our 2021 Proxy Statement. Such information is incorporated herein by reference.

Item 12.     Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Our information relating to this item is set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” of our 2021 Proxy Statement. Such information is incorporated herein by reference.

Information concerning our equity compensation plan is included in Part II of this report under the caption “Equity Compensation Plan Information.”

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Item 13.     Certain Relationships and Related Transactions, and Director Independence

Our information relating to this item is set forth under the captions “Corporate Governance – Review of Transactions with Related Persons” and “Corporate Governance - Board and Board Committee Information” of our 2021 Proxy Statement. Such information is incorporated herein by reference.

Item 14.     Principal Accounting Fees and Services

Our information relating to this item is set forth under the caption “Independent Public Auditors” of our 2021 Proxy Statement. Such information is incorporated herein by reference.

PART IV

Item 15.     Exhibits, Financial Statement Schedules

(a)        Documents filed as a part of this Report:

(1)	The following financial statements are included in this report on Form 10-K:
	Report of Independent Registered Public Accounting Firm
	Balance Sheets as of December 31, 2020 and 2019
	Statements of Operations for each of the two years in the period ended December 31, 2020
	Statements of Changes in Stockholders’ Equity for each of the two years in the period ended December 31, 2020
	Statements of Cash Flows for each of the two years in the period ended December 31, 2020
	Notes to Financial Statements
(b)	Exhibits:
3.1	Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q (Commission File No. 0-14939) for the quarter ended June 30, 2019).
3.2	By-laws of the Registrant as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed November 20, 2017).
3.3	Certificate of Designation of Series A Participating Preferred Stock of Stanley Furniture Company, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed December 6, 2016).
4.1	The Certificate of Incorporation, By-laws and Certificate of Designation of Series A Participating Preferred Stock of the Registrant as currently in effect (incorporated by reference to Exhibit 3.1, Exhibit 3.2 and Exhibit 3.3 hereto).
4.2	Rights Agreement, dated as of December 5, 2016, between Stanley Furniture Company, Inc. and Continental Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed December 6, 2016).
4.3	Amendment No. 1, dated as of January 30, 2017, to the Rights Agreement, dated as of December 5, 2016, between Stanley Furniture Company, Inc. and Continental Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (Commission Rule No. 0-14938) filed January 30, 2017).

18

4.4	Amendment No. 2, dated as of December 5, 2019, to the Rights Agreement, dated as of December 5, 2016, between HG Holdings, Inc. and Continental Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (Commission Rule No. 0-14938) filed December 5, 2019).
4.5	Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. (3)
10.1	Form of Indemnification Agreement between the Registrant and each of its Directors (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed on September 25, 2008).
10.2	2008 Incentive Compensation Plan (incorporated by reference to Exhibit A to the Registrant’s Proxy Statement (Commission File No. 0-14938) for the annual meeting of stockholders held on April 15, 2008). (2)
10.3	Form of Stock Option Award under 2008 Incentive Plan (Directors) (incorporated by reference to Exhibit 10.22 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year ended December 31, 2008). (2)
10.4	2012 Incentive Compensation Plan (incorporated by reference to Exhibit A to the Registrant’s Proxy Statement (Commission File No. 0-14938) for the annual meeting of stockholders held on April 18, 2012). (2)
10.5	Amendment to 2012 Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (Commission Rule No. 0-14938) filed December 30, 2020).
10.6	Form of Stock Option Award under 2012 Incentive Plan (Officers) (incorporated by reference to Exhibit 10.19 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year ended December 31, 2012). (1)
10.7	Form of Restricted Stock Award under 2012 Incentive Plan (Officers) (time vesting) (incorporated by reference to Exhibit 10.20 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year ended December 31, 2012). (2)
10.8	Form of Restricted Stock Award under 2012 Incentive Plan (Directors) (incorporated by reference to Exhibit 10.21 to the Registrant’s Form 10-K (Commission File No. 0-14938) for year ended December 31, 2014). (2)
10.9	Form of Restricted Stock Award under 2012 Incentive Plan (Officers) (time and performance vesting) (incorporated by reference to Exhibit 10.22 to the Registrant’s Form 10-K (Commission File No. 0-14938) for year ended December 31, 2014). (2)
10.10	Form of Restricted Stock Award under 2012 Incentive Plan (Officers) (performance vesting) (incorporated by reference to Exhibit 10.23 to the Registrant’s Form 10-K (Commission File No. 0-14938) for year ended December 31, 2014). (2)
10.11	Agreement, dated as of January 30, 2017, by and among Stanley Furniture Company, Inc. and the entities and natural persons listed on Exhibit A thereto (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K (Commission File No. 0-14938) filed January 30, 2017).
10.12	Forbearance Extension Letter Agreement, dated as of February 24, 2020, by and among Stanley Furniture Company LLC, Stanley Intermediate Holdings LLC, Stanley Furniture Company 2.0, LLC and Churchill Downs Holdings Ltd., and HG Holdings, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed February 25, 2020).
10.13	Second Forbearance Extension Letter Agreement, dated as of March 6, 2020, by and among Stanley Furniture Company LLC, Stanley Intermediate Holdings LLC, Stanley Furniture Company 2.0, LLC and Churchill Downs Holdings Ltd., and HG Holdings Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed March 12, 2020).

19

10.14	Subscription Agreement, dated as of April 3, 2020, by and between HC Government Realty Trust, Inc. and HG Holdings, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed April 9, 2020).
10.15	Subscription Agreement, dated as of April 9, 2020, by and between HC Government Realty Trust, Inc. and HG Holdings, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed April 10, 2020).
10.16	Subscription Agreement, dated as of June 29, 2020, by and between HC Government Realty Trust, Inc. and HG Holdings, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed June 30, 2020).
21	List of Subsidiaries. (3)
23.1	Consent of Cherry Bekaert LLP. (3)
31.1	Certification by Steven A. Hale II, our Chairman and Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended. (3)
31.2	Certification by Brad G. Garner, our Principal Financial and Accounting Officer, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended. (3)
32.1	Certification by Steven A. Hale II, our Chairman and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (4)
32.2	Certification by Brad G. Garner, our Principal Financial and Accounting Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (4)
101	The following financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2020, formatted in Extensible Business Reporting Language (“XBRL”): (i) balance sheets, (ii) statements of operations, (iii) condensed statements of cash flows, (iv) the notes to the financial statements, and (v) document and entity information. (3)

(1)	Certain schedules to these agreements have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedules and/or exhibits will be furnished to the SEC upon request.
(2)	Management contract or compensatory plan
(3)	Filed Herewith
(4)	Furnished Herewith

Item 16.     10-K Summary

None.

20

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	HG HOLDINGS, INC.
March 1, 2021	By:	/s/ Steven A. Hale II
		Steven A. Hale II
		Chairman, Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/Steven A. Hale II (Steven A. Hale II)	Chairman, Chief Executive Officer and Director	March 1, 2021
/s/Brad G. Garner (Brad G. Garner)	Principal Financial and Accounting Officer	March 1, 2021
/s/Peter M. Sherman (Peter M. Sherman)	Director	March 1, 2021
/s/Jeffrey S. Gilliam (Jeffrey S. Gilliam)	Director	March 1, 2021

21

HG HOLDINGS, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2020

INDEX TO FINANCIAL STATEMENTS

	Page
Reports of Independent Registered Public Accounting Firm	F-2
Financial Statements
Balance Sheets as of December 31, 2020 and 2019	F-3
Statements of Operations for each of the two years in the period ended December 31, 2020	F-4
Statements of Changes in Stockholders’ Equity for each of the two years in the period ended December 31, 2020	F-5
Statements of Cash Flows for each of the two years in the period ended December 31, 2020	F-6
Notes to Financial Statements	F-7

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

HG Holdings, Inc.

Charlotte, North Carolina

Opinion on the Financial Statements

We have audited the accompanying balance sheets of HG Holdings, Inc. (the “Company”) as of December 31, 2020 and 2019, the related statements of operations, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of S&L Note

Description of Matter

As disclosed in Note 3 to the financial statements, the Company has a reserve on its S&L Note of $1.39 million against a gross balance of $3.27 million at December 31, 2020, which includes a $833,000 impairment recorded in 2020.  The reserve is recorded to reduce the outstanding note receivable to its net realizable value based on a review of the debtor’s economic performance and market conditions, after consideration of the fair value of the Company’s collateral rights (e.g., accounts receivable inventory, property and equipment) and any guarantees.   

Auditing the valuation of the reserve is challenging due to the judgment inherent in estimating the fair value of the Company’s collateral rights, which has a significant effect on the measurement of the reserve on the subordinated receivable. 

How We Addressed the Matter in Our Audit

Our audit procedures included the following:

● We obtained an understanding of the internal controls and processes in place over management’s valuation process for subordinated receivables.

● We obtained support to evaluate the status of collection of scheduled payments on the outstanding S&L Note, analyzed financial reports to identify indicators of debtor’s financial health, and evaluated the estimates of the collateral value.

● We confirmed the gross S&L Note balance and year-end financial reports directly with the debtor.

We have served as the Company’s auditor since 2019.

/s/ Cherry Bekaert, LLP

Richmond, Virginia

March 1, 2021                           

F-2

HG HOLDINGS, INC.

BALANCE SHEETS

(in thousands, except share data)

	2020			2019
ASSETS
Current assets:
Cash	$	11,396		$	2,567
Restricted cash		234			233
Interest and dividend receivables		298			91
Prepaid expenses and other current assets		139			176
Income tax receivable		488			735
Total current assets		12,555			3,802
Property, plant and equipment, net		7			7
Investment in affiliate		12,072			4,405
Subordinated notes receivable		1,883			3,379
Loan to affiliate		-			2,000
Other assets		509			494
Deferred tax assets		-			247
Total assets	$	27,026		$	14,334
LIABILITIES
Current liabilities:
Accounts payable	$	3		$	7
Accrued salaries, wages and benefits		2			5
Other accrued expenses		58			168
Total current liabilities		63			180
Other long-term liabilities		243			255
Total liabilities		306			435
STOCKHOLDERS’ EQUITY
Common stock, $0.02 par value, 35,000,000 shares authorized, 34,404,556 and 14,946,839 shares issued and outstanding on each respective date		684			294
Capital in excess of par value		29,738			17,370
Retained deficit		(3,702	)		(3,765	)
Total stockholders’ equity		26,720			13,899
Total liabilities and stockholders’ equity	$	27,026		$	14,334

The accompanying notes are an integral part

 of the financial statements.

F-3

HG HOLDINGS, INC.

STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	For the Years Ended
	December 31,
	2020			2019
Operating Expenses
General and administrative expenses	$	(1,304	)	$	(1,133	)
Total operating expenses		(1,304	)		(1,133	)
Interest income		608			1,039
Dividend income		684			157
Gain on sale of closely held stock		-			120
Gain on extinguishment of subordinated note receivable		1,326			-
Loss from affiliate		(418	)		(430	)
Income from Continued Dumping and Subsidy Offset Act, net		-			1,230
Impairment loss		(833	)		(897	)
Income from operations before income taxes		63			86
Income tax benefit		-			84
Net income	$	63		$	170
Basic and diluted income per share:
Net income	$	.00		$	.01
Weighted average shares outstanding:
Basic		25,004			14,507
Diluted		25,421			14,937

The accompanying notes are an integral part

of the financial statements.

F-4

HG HOLDINGS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For each of the two years in the period ended December 31, 2020

(in thousands)

						Capital in		Retained
	Common Stock					Excess of		Earnings
	Shares			Amount		Par Value		(Deficit)			Total
Balance at December 31, 2018		14,712		$	294	$	17,285	$	(3,935	)	$	13,644
Net income		-			-		-		170			170
Restricted stock forfeited or expired		(182	)		-		-		-			-
Stock-based compensation		417			-		85		-			85
Balance at December 31, 2019		14,947		$	294	$	17,370	$	(3,765	)	$	13,899
Net income		-			-		-		63			63
Issuance of common stock		19,500			390		12,285		-			12,675
Options forfeited or expired		(42	)		-		-		-			-
Stock-based compensation		-			-		83		-			83
Balance at December 31, 2020		34,405		$	684	$	29,738	$	(3,702	)	$	26,720

The accompanying notes are an integral part

of the financial statements.

F-5

HG HOLDINGS, INC.

STATEMENTS OF CASH FLOWS

(in thousands)

	For the Years Ended December 31,
	2020			2019
Income from continuing operations	$	63		$	170
Adjustments to reconcile net income from operations to net cash flows from operating activities:
Depreciation expense		3			2
Accretion income on notes receivable		(104	)		(217	)
Stock compensation expense		83			85
Gain on extinguishment of subordinated note receivable		(1,326	)		-
Gain on sale of closely held stock		-			(120	)
Paid in kind interest on subordinated note receivable		(25	)		-
Impairment loss on subordinated note receivable		833			897
Dividends on HC Realty common stock		165			124
Loss from affiliate		418			430
Changes in assets and liabilities:
Prepaid expenses and other current assets		37			47
Interest and dividend receivables		(207	)		-
Income tax receivables		247			(247	)
Deferred tax assets and other assets		232			232
Accounts payable		(4	)		(22	)
Accrued salaries and other accrued expenses		(113	)		46
Other long-term liabilities		(12	)		(32	)
Net cash provided by continuing operations		290			1,395
Cash flows from investing activities:
Purchase of property, plant and equipment		(3	)		-
Investment in affiliate		(8,250	)		(5,000	)
New advances on loan receivable from affiliate		-			(2,000	)
Principal payments received on subordinated secured notes receivable		2.118			1,824
Principal repayments on loan receivable from affiliate		2,000			-
Proceeds from sale of closely held stock		-			120
Net cash used by investing activities		(4,135	)		(5,056	)
Cash flows from financing activities:
Issuance of common stock		12,675			-
Net cash provided by financing activities		12,675			-
Net increase (decrease) in cash and restricted cash		8,830			(3,661	)
Cash and restricted cash at beginning of period		2,800			6,461
Cash and restricted cash at end of period	$	11,630		$	2,800
Cash	$	11,396		$	2,567
Restricted cash		234			233
Cash and restricted cash	$	11,630		$	2,800

Supplemental Non-Cash Disclosures:
Dividends on investment in affiliate	$	200	$	150

The accompanying notes are an integral part

of the financial statements

F-6

HG HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Significant Accounting Policies

Organization and Basis of Presentation

HG Holdings, Inc.’s (the “Company”) financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”).  

On March 2, 2018, we sold substantially all of our assets (the “Asset Sale”) to Stanley Furniture Company LLC, formerly Churchill Downs LLC (“Buyer”), pursuant to the terms of the Asset Purchase Agreement, dated as of November 20, 2017, as amended by the First Amendment thereto dated January 22, 2017 (the “Asset Purchase Agreement”). As a result of the sale, on March 2, 2018, the Company’s Board of Directors approved an amendment to the Company’s Restated Certificate of Incorporation to change the name of the Company to HG Holdings, Inc. The amendment became effective upon the filing of a Certificate of Amendment with the Secretary of State of the State of Delaware on March 2, 2018.

As a result of the Asset Sale, the Company had and continues to have no revenue-generating operations. On March 19, 2019, we purchased 300,000 shares of HC Realty’s Common Stock (the “HC Common Stock”) for an aggregate purchase price of $3,000,000 and 200,000 shares of HC Realty’s 10.00% Series B Cumulative Convertible Preferred Stock (the “HC Series B Stock”) for an aggregate purchase price of $2,000,000. On April 3, April 9, and June 29, 2020, the Company entered into subscription agreements with HC Realty, pursuant to which we purchased 100,000, 250,000, and 475,000 shares of Series B Stock, respectively, for an aggregate purchase price of $8,250,000. As a result of these purchases, we currently own approximately 36.4% of the as-converted equity interest of HC Realty.

Also on March 19, 2019, we, together with certain other lenders, including certain entities affiliated with HPCM (collectively, the “Lenders”), entered into a loan agreement (the “Loan Agreement”) with HC Realty’s operating partnership, and HCM Agency, LLC, as collateral agent (the “Agent”), pursuant to which the Lenders provided HC Realty’s operating partnership with a $10,500,000 senior secured term loan (the “Initial Term Loan”), of which $2,000,000 was provided by us. On August 14, 2020, pursuant to the terms of the Loan Agreement, HC Realty’s operating partnership repaid the loan in full, including all accrued interest and make whole interest.

As a result of these investments, our sources of income include dividends on HC Realty Series B Stock and interest paid on cash and subordinated secured promissory notes.  The Company believes that the revenue generating from these sources in addition to the cash on hand is sufficient to fund operating expenses for at least 12 months from the date of these financial statements.  On June 19, 2020, the Company raised $12,675,000, the maximum gross proceeds possible, through its rights offering (the “Rights Offering”) which concluded on June 19, 2020. Pursuant to the Rights Offering, the Company distributed non-transferable rights to purchase 19,500,000 shares of its common stock at a purchase price of $0.65 per share to stockholders of record as of May 18, 2020. As a result of the rights offering, the Company issued 19,500,000 new shares of common stock.  On June 29, 2020, the Company used $4.75 million of the proceeds of the rights offering to purchase additional HC Realty Series B Stock.  The Company intends to use the remaining proceeds of the Rights Offering to provide additional cash for acquisitions, which may include purchasing additional HC Series B Stock, HC Common Stock or debt of HC Realty.

Cash

We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. 

F-7

Restricted Cash

Restricted cash includes collateral deposits required under the Company’s letter of credit agreement, which expires in June 2021, to guarantee the Company’s workers compensation insurance policy. The restricted cash balance is expected to mature over the next six months. As of December 31, 2020, there was no outstanding balance on the letter of credit agreement.

Concentration of Credit Risk

The Company place its cash and restricted cash with financial institutions and, at times, cash held in depository accounts may exceed the Federal Deposit Insurance Corporation insured limit.

Interest Income

Interest income is recorded on an accrual basis based on the effective interest rate method and includes the accretion of fair value adjustments/discounts. Fair value adjustments to par value are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of fair value adjustments, if any.

Other revenues are recognized when contractual obligations are fulfilled or as services are provided.

Payment-in-Kind Interest

The Company has subordinated secured notes receivables that may contain payment-in-kind (“PIK”) provisions. The PIK interest, computed at the contractual rate specified in the loan agreement, is added to the principal balance of the loan and recorded as interest income.

Variable Interest Entities

As a result of both the Asset Sale and the S&L Asset Sale, we have a variable interest in three entities that have been determined to be variable interest entities ("VIE"). If we conclude that we are the primary beneficiary of a VIE, we are required to consolidate it. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of significant activities and an assessment of our ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding, financing, and other applicable agreements and circumstances. Our assessments of whether we are the primary beneficiary of our VIE requires significant assumptions and judgments. We have concluded that we are not the primary beneficiary of the three VIEs as we do not have the power to direct the activities that most significantly impact the VIEs’ economic performance and therefore are not required to consolidate these entities.

F-8

Subordinated Notes Receivable

In accordance with ASC 810-40-5, upon the sale of substantially all of the assets the Company recorded a gain on the deconsolidation of a group of assets based on the difference between the fair value of the consideration received and the carrying amount of the group of assets. As the Original Note was part of the consideration received, the Company recorded the Original Note at its fair value on March 2, 2018. The fair value of the Original Note was estimated using discounted cash flow analyses, using market rates at the acquisition date that reflect the credit and inherent rate-risk inherent in the Original Note. The discount resulting from the fair value adjustment was recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method. As of the date of the assignment and transfer from the Buyer to S&L, it was determined that the Original Note was extinguished and therefore both the A&R Note and the S&L Note were measured based on their fair value in accordance with Emerging Issues Task Force (EITF) – Creditors Accounting for Modification or Exchange of Debt Instruments.  The discounts resulting from the fair value adjustments for the A&R Note and the S&L Note were recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method.  When impairment is determined to be probable, the measurement will be based on the fair value of the collateral securing the notes.  The determination of impairment involves management’s judgment and the use of market and third-party estimates regarding collateral values.  During 2020 management determined that S&L Note was other than temporarily impaired and recorded an impairment loss of $833,000.

Property, Plant and Equipment

Depreciation of property, plant and equipment is computed using the straight-line method based upon the estimated useful lives. Depreciation expense is charged to general and administrative expenses. Gains and losses related to dispositions and retirements are included in income. Maintenance and repairs are charged to expense as incurred; renewals and betterments are capitalized. Assets are reviewed for possible impairment when events indicate that the carrying amount of an asset may not be recoverable. Assumptions and estimates used in the evaluation of impairment may affect the carrying value of property, plant and equipment, which could result in impairment charges in future periods. Our depreciation policy reflects judgments on the estimated useful lives of assets. Our long-lived assets were tested for impairment at December 31, 2020 and determined that the long-lived assets were not impaired.

Equity Investments

Long-term investments consist of investments in equity securities where our ownership is less than 50% and the Company has the ability to exercise significant influence, but not control, over the investee.  These investments are classified in “Investment in affiliate” on the balance sheets.  Investments accounted for under the equity method of accounting are initially recorded at cost and subsequently increases or decreases the investment by its proportionate share of the net income or loss and other comprehensive income or loss of the investee. For investments that do not have a readily determinable fair value, the Company made an accounting policy election for a measurement alternative.   Upon adoption of ASU 2016-01, the Company carries these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transaction for the identical or a similar investment of the same issuer. The Company reviews its equity securities without readily determinable fair values on a regular basis to determine if the investment is impaired. For purposes of this assessment, the Company considers the investee’s cash position, liquidity, earnings and revenue outlook, equity position, and ownership, among other factors, in its review.  If management’s assessment indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes in current earnings an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount.

Income Taxes

Deferred income taxes are determined based on the difference between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.  Deferred tax expense represents the change in the deferred tax asset/liability balance. Income tax credits are reported as a reduction of income tax expense in the year in which the credits are generated.  A valuation allowance is recorded when it is more likely than not that a deferred tax asset will not be realized.  Interest and penalties on uncertain tax positions are recorded as income tax expense.

Fair Value of Financial Instruments

Accounting for fair value measurements requires disclosure of the level within the fair value hierarchy in which fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). The fair value of receivables and payables approximate the carrying amount because of the short maturity of these instruments.

F-9

Earnings per Common Share

Basic earnings per share is computed based on the weighted average number of common shares outstanding. Diluted earnings per share includes any dilutive effect of outstanding stock options and restricted stock calculated using the treasury stock method.

Stock-Based Compensation

We record share-based payment awards at fair value on the grant date of the awards, based on the estimated number of awards that are expected to vest, over the vesting period. The fair value of stock options was determined using the Black-Scholes option-pricing model. The fair value of the restricted stock awards was based on the closing price of the Company’s common stock on the date of the grant. For awards with performance conditions, we recognize compensation cost over the expected period to achieve the performance conditions, provided achievement of the performance conditions are deemed probable.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Changes in such estimates may affect amounts reported in future periods.

New Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).  The amendments in ASU 2016-13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.  The amendment is effective for public entities for annual reporting periods beginning after December 15, 2022, however early application is permitted for reporting periods beginning after December 15, 2018.  The Company does not anticipate the adoption of ASU 2016-13 to have a material impact to the financial statements.

2.     Property, Plant and Equipment

	Depreciable
	lives			(in thousands)
	(in years)			2020		2019
Computers and equipment	3	to	7	$	10	$	7
Furniture and fixtures	5	to	7		3		3
Property, plant and equipment, at cost					13		10
Less accumulated depreciation					6		3
Property, plant and equipment, net				$	7	$	7

3.     Subordinated Notes Receivable

The Company received a $7.4 million subordinated secured promissory note from the Buyer as partial consideration for the sale of substantially all of our assets during the first quarter of 2018. On September 6, 2018, the Buyer sold certain of its assets, including certain inventory and the Stone & Leigh tradename to S&L, which is owned by a group which includes Matthew W. Smith, the Company’s former interim Chief Executive Officer. As a part of the S&L Asset Sale, the Buyer assigned to S&L certain of its rights and obligations under the original $7.4 million subordinated secured promissory note. In connection with the assignment, the Company entered into an Amended and Restated Subordinated Secured promissory note with the Buyer (the “A&R Note”) and a new Subordinated Secured Promissory Note with S&L (the “S&L Note”). The A&R Note had a principal amount as of the assignment date of $3.3 million.

F-10

A&R Note

On February 7, 2019, the Company, Buyer and related parties entered into a Consent, Reaffirmation, and Joinder (the “Consent”) in connection with a new senior credit facility that Buyer expected to enter into with Alterna Capital Solutions, LLC (“Alterna”).  Pursuant to the Consent, Buyer delivered a Second Amended and Restated Subordinated Secured Promissory Note (the “Second A&R Note”) in favor of the Company. The Second A&R Note had a principal amount of $3.2 million and remained payable no later than March 2, 2023, at which time the total principal amount was due. Interest on the principal balance of the note continued to accrue daily at an annual fixed rate of 6%. The other terms of the Second A&R Note were substantially the same as those of the A&R Note. The Second A&R Note was guaranteed by Stanley Intermediate Holdings LLC, formerly Churchill Downs Intermediate Holdings LLC. Pursuant to the Consent, Buyer’s British Virgin Island parent company also guaranteed the Second A&R Note.

On February 25, 2019, Buyer closed and funded its new senior credit facility with Alterna. Pursuant to the Consent, the Company entered into an Intercreditor and Debt Subordination Agreement, dated February 25, 2019 (the “Subordination Agreement”), with Alterna. The Subordination Agreement with Alterna was generally on the same terms as the subordination agreement the Company previously entered into with North Mill Capital, LLC in connection with the original subordinated secured promissory note dated March 2, 2018 from Buyer in favor of the Company, except that principal payments on the Second A&R Note, before satisfaction of the of indebtedness to Alterna and termination of the Subordination Agreement, were conditioned upon (l) no event of default under the new senior credit facility existing or resulting from the payment,  (2) availability under the new senior credit facility to make the payment, (3) all tax and debt obligations of Buyer being current and within their terms, and (4) there being no delinquency in payables or other obligations of Buyer to specified critical vendors.

Despite Buyer paying interest quarterly in advance on the Second A&R Note, the Company concluded during the second quarter of 2019, based on the then current information and events in the Buyer’s business, that the Company did not believe it would be able to collect the entire amount due according to the Second A&R Note and determined that the note was other than temporarily impaired. The evaluation was generally based on an assessment of the borrower’s financial condition and the adequacy of the collateral securing the Second A&R Note. Given the facts and circumstances present during the second quarter of 2019, the Company recorded an impairment loss of $897,000 in the second quarter of 2019 resulting in the carrying value of the A&R Note decreasing to $1.3 million as of June 30, 2019. On August 21, 2019, the Company delivered a notice of default to Buyer under the Second A&R Note. The Company delivered this notice after receiving information from Alterna that Buyer was then in default under its credit facility with Alterna.

On October 31, 2019, the Company entered into a Forbearance Agreement with the Buyer and certain affiliates (the “Loan Parties”) pursuant to which the Company agreed, subject to certain conditions, to forbear until February 24, 2020 from exercising its rights and remedies under the Second A&R Note issued by Buyer to the Company. On February 24, 2020, the Company and the Loan Parties entered into a letter agreement (the “Forbearance Extension Letter Agreement”) extended the outside termination date for the forbearance period under the Forbearance Agreement from February 24, 2020 to February 26, 2020. The other terms and conditions of the Forbearance Agreement remained the same. The forbearance period terminated on February 26, 2020 under the terms of the Forbearance Extension Letter Agreement and Forbearance Agreement.

The Company received payments on January 31, 2020, February 28, 2020, and March 4, 2020 of $130,000, $200,000 and $350,000, respectively, of the principal amount on the Second A&R Note from the Buyer.

On March 6, 2020, the Company and the Loan Parties entered into a letter agreement (the “Second Forbearance Extension Letter Agreement”) extended, subject to certain conditions, the outside termination date from February 26, 2020 to March 17, 2020. The extension of the outside termination and the effectiveness of the Second Forbearance Extension Letter Agreement was conditioned on Buyer making payments to be applied to the outstanding principal balance of the Second A&R Note of $250,000 on or before March 12, 2020 and $750,000 on or before March 13, 2020. The Second Forbearance Extension Letter Agreement also required the Buyer to make an additional $391,970 payment on or before March 17, 2020 to be applied to the outstanding principal balance of the Second A&R Note. The other terms and conditions of the Forbearance Agreement remained the same.

F-11

On March 12 and 13, 2020, the Company received payments from Buyer of $250,000 and $750,000, respectively, pursuant to the Second Forbearance Extension Letter Agreement which payments were applied to the outstanding principal amount of the Second A&R Note.

On March 16, 2020, the Company received payment of $392,000 from the Buyer resulting in satisfaction in full of the Second A&R Note pursuant to the terms of the Forbearance Agreement as amended. As a result of the payments received from Buyer in the first quarter of 2020 on the Second A&R Note, the Company recognized a gain of $1.3 million on the payoff of the Second A&R Note during the first quarter of 2020.

The Company did not receive any cash interest payments during the year ended December 31, 2020 as interest for the quarter was paid in advance on December 31, 2019 and recorded as a principal payment.

A reconciliation of the activity in the Second A&R Note for the years ended December 31, 2020 and 2019 is as follows (in thousands):

	Principal			Discount			Balance
Balance at January 1, 2019	$	3,376		$	(1,012	)	$	2,364
Principal payments		(812	)		-			(812	)
Impairment		-			(897	)		(897	)
Accretion of discount		-			54			54
Balance at December 31, 2019	$	2,564		$	(1,855	)	$	709
Interest paid-in-kind		25			-			25
Gain on settlement of debt		(529	)		1,855			1,326
Principal payments		(2,060	)		-			(2,060	)
Balance at December 31, 2020	$	-		$	-		$	-

S&L Note

The S&L Note had a principal amount of $4.4 million as of the assignment date. The S&L Note matures on March 2, 2023, at which time the total principal amount is due. Interest on the S&L Note accrues at a fixed rate of 10% per annum. Cash interest payments of $252,000 and $356,000 were accrued or received during the years ended December 31, 2020 and 2019, respectively. During the years ended December 31, 2020 and 2019, the Company received $58,000 and $1,011,000 of principal payments on the S&L Note, respectively.

At the assignment date, the Company evaluated the fair value of the S&L Note. The Company recorded accreted interest income on the fair value adjustment of the S&L Note of $104,000 and $163,000 for the years ended December 31, 2020 and 2019, respectively.

The Company recorded an impairment loss of $833,000 and $0 during the years ended December 31, 2020 and 2019.  Accordingly, the Company ceased accruing interest and accreting interest income on the fair value discount of the S&L Note on the date in the third quarter of 2020 the Company determined the note was other than temporarily impaired.  The Company recognized the interest payments of $58,000 received in the fourth quarter 2020 as reductions of the principal balance of the S&L Note.  

As of December 31, 2020, the Company concluded that the estimated fair market value of the S&L Note will provide adequate cash required to repay the $1.9 million carrying value of the S&L Note.  The Company’s estimated fair value of the S&L Note is based upon the estimated fair value of the collateral securing the note, namely cash, accounts receivables, and inventory.  The determination of fair value involves management’s judgment, including analysis of the impact of COVID-19 on S&L’s business and its customers, and the use of market and third-party estimates regarding collateral values.  These collateral value estimates are based on the three-level valuation hierarchy for fair value for fair value measurement and represent Level 1 and 2 inputs.  Level 1 inputs are quoted prices in active markets for identical assets or liabilities.  Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. 

F-12

A reconciliation of the activity in the S&L Note for the years ended December 31, 2020 and 2019 is as follows (in thousands):

	Principal			Discount			Balance
Balance at January 1, 2019	$	4,340		$	(822	)	$	3,518
Principal payments		(1,011	)		-			(1,011	)
Accretion of discount		-			163			163
Balance at December 31, 2019	$	3,329		$	(659	)	$	2,670
Principal payments		(58	)		-			(58	)
Accretion of discount		-			104			104
Impairment		-			(833	)		(833	)
Balance at December 31, 2020	$	3,271		$	(1,388	)	$	1,883

4.      Loan to Affiliate

On March 19, 2019, the Company, together with certain other Lenders, entered into a loan agreement (the “Loan Agreement”) with HC Realty’s operating partnership, and HCM Agency, LLC, as collateral agent (the “Agent”), pursuant to which the Lenders provided HC Realty’s operating partnership with a $10,500,000 senior secured term loan (the “Initial Term Loan”), of which $2,000,000 was provided by the Company.

The Loan Agreement was to mature on March 19, 2022.  Interest on the Loan Agreement accrued at a rate of 14% per annum. 

On August 14, 2020, pursuant to the terms of the Loan Agreement, HC Realty’s operating partnership repaid the loan in full, including all accrued interest and make whole interest. Interest earned for the years ended December 31, 2020 and 2019 was $204,000 and $223,000, respectively.

5.      Investment in Affiliate

On March 19, 2019, the Company entered into subscription agreements with HC Realty, pursuant to which it purchased (i) 200,000 shares of HC Realty’s 10.00% Series B Cumulative Convertible Preferred Stock (the “Series B Stock”) for an aggregate purchase price of $2,000,000 and (ii) 300,000 shares of HC Realty’s common stock for an aggregate purchase price of $3,000,000. Certain investors affiliated with HPCM purchased an additional 850,000 shares of Series B Stock for an aggregate purchase price of $8,500,000. On April 3, April 9, and June 29, 2020, the Company entered into subscription agreements with HC Realty, pursuant to which we purchased 100,000, 250,000, and 475,000 shares of Series B Stock, respectively, for an aggregate purchase price of $8,250,000. While some of these investors have other investments with HPCM, each of these investors made a separate and direct investment in HC Realty and HPCM does not receive management fees, performance fees, or any other economic benefits with respect to these investors’ investment in HC Realty’s Series B Stock.

The Series B Stock is not deemed to be in-substance common stock and is accounted for using the measurement alternative for equity investments with no readily determinable fair value. The Series B Stock will be reported at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar investments issued by HC Realty.

F-13

The following table summarizes the Company’s investment in HC Realty as of the two years ended December 31, 2020 (in thousands):

	Ownership %						Investment in Affiliate Balance				Loss recorded in the Consolidated Statements of Operations (b)
	December 31, 2020			December 31, 2019			December 31, 2020		December 31, 2019		2020			2019
HC Realty Series B Stock (a)		28.7	%		7.9	%	$	10,250	$	2,000	$	-		$	-
HC Realty common stock		7.7	%		8.5	%		1,822		2,405		(418	)		(430	)
Total		36.4	%		16.4	%	$	12,072	$	4,405	$	(418	)	$	(430	)

(a) Represents investments in shares of HC Realty preferred stock with a basis of $10.25 million. Each share of preferred stock can be converted into one share of HC Realty common stock at a conversion price equal to the lesser of $9.10 per share or the fair market value per share of HC Realty common stock, subject to adjustment upon the occurrence of certain events.

(b) Loss from these investments is included in “Loss from affiliate” in the statements of operations. Since HC Realty is a Real Estate Investment Trust and not a taxable entity, the loss is not reported net of taxes.

The Company’s investment in HC Realty common stock is accounted for under the equity method of accounting. For portions of the year ended December 31, 2020, the Company owned less than 20% of the fully diluted shares outstanding. The Company determined that accounting for the investment in HC Realty common stock under the equity method was appropriate for the portion of time the Company owned less than 20% because the Company holds significant influence of HC Realty.

6.     Income Taxes

The provision for income tax (benefit) expense consists of (in thousands):

	2020			2019
Current:
Federal	$	(247	)	$	-
State		-			(84	)
Total current		(247	)		(84	)
Deferred:
Federal		247			-
State		-			-
Total deferred		247			-
Income tax (benefit) expense from continuing operations	$	-		$	(84	)

A reconciliation of the difference between the federal statutory income tax rate and the effective income tax rate follows:

	2020			2019
Federal statutory rate		21.0	%		21.0	%
State tax, net of federal benefit		(0.1	)		3.8
Deferred correction – State NOLs		(359.7	)		(122.7	)
Permanent differences		2.3			-
Valuation allowance increase		360.4			(3.9	)
Other, net		(24.0	)		4.3
Effective income tax rate		-	%		(97.6	)%

F-14

The income tax effects of temporary differences that comprise deferred tax assets and liabilities at December 31 follow (in thousands):

	2020			2019
Noncurrent deferred tax assets:
Equity method investment	$	195		$	99
Other accrued expenses		33			32
Notes receivable fair value adjustment		319			578
Employee benefits		50			65
Capital loss carryforward		11			-
AMT credit		-			247
Net operating loss		7,861			7,726
Gross non-current deferred tax assets		8,469			8,747
Noncurrent deferred tax liabilities:
Property, tax, and equipment	$	(1	)	$	(1	)
Non-taxable dividends		(193	)		-
Valuation allowance		(8,275	)		(8,499	)
Gross non-current deferred tax liabilities		(8,469	)		(8,500	)
Net noncurrent deferred tax assets	$	-		$	247

We have U.S. federal net operating loss carryforwards of approximately $35.3 million which are available to reduce future taxable income. The federal net operating loss will begin expiring in 2033. We have combined state net operating loss carryforwards of $22.5 million that will expire at various times beginning in 2027.

During 2020, we recorded a non-cash credit to our valuation allowance of approximately $226,000 against our December 31, 2020 deferred tax assets.  The primary assets which are covered by this valuation allowance are employee benefits and net operating losses in excess of the amounts which can be carried back to prior periods. The valuation allowance was calculated in accordance with the provisions of ASC 740, Income Taxes, which requires an assessment of both positive and negative evidence when measuring the need for a valuation allowance.  Our results over the most recent four-year period were heavily affected by our business restructuring activities. Our cumulative loss represented sufficient negative evidence to require a valuation allowance.  We intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal, resulting in no deferred tax asset balance being recognized.  Should we determine that we will not be able to realize all or part of our deferred tax asset in the future, an adjustment to the deferred tax asset will be charged to income in the period such determination is made. 

The unrecognized tax benefits activity for the year ended December 31 follows (in thousands):

	2020		2019
Unrecognized tax benefits balance at January 1	$	157	$	241
Gross decrease in tax positions of prior years		-		(84	)
Unrecognized tax benefits balance at December 31	$	157	$	157

Total amount of unrecognized tax benefits that would affect our effective tax rate if recognized is $157,000 at December 31, 2020 and 2019. The 2013 through 2019 tax years remain open to examination by major taxing jurisdictions.   

7.       Stockholders’ Equity

In addition to common stock, authorized capital includes 1,000,000 shares of “blank check” preferred stock. None was outstanding during the two years ended December 31, 2020. The Board of Directors (“Board”) is authorized to issue such stock in series and to fix the designation, powers, preferences, rights, limitations and restrictions with respect to any series of such shares. Such “blank check” preferred stock may rank prior to common stock as to dividend rights, liquidation preferences or both, may have full or limited voting rights and may be convertible into shares of common stock.

Basic and diluted earnings per share are calculated using the following share data (in thousands):

	2020		2019
Weighted average shares outstanding for basic calculation		25,004		14,507
Dilutive effect of restricted stock		417		430
Weighted average shares outstanding for diluted calculation		25,421		14,937

F-15

For the year ended December 31, 2020 there were no stock awards excluded from the diluted per share calculation. For the year ended December 31, 2019, approximately 42,000 stock awards were excluded from the diluted per share calculation as they would be anti-dilutive.

From time to time, we will repurchase common shares that are tendered by recipients of restricted stock awards to satisfy tax withholding obligations on vested restricted stock. There were no repurchases during 2020 or 2019.

In July 2012, the Board authorized the purchase of up to $5.0 million of our common stock. These repurchases may be made from time to time in the open market, in privately negotiated transactions, or otherwise, at prices the Company deems appropriate. No repurchases of our common stock were made in 2020 or 2019. The Board does not intend to repurchase any additional shares of our common stock under this authorization.

In the fourth quarter of 2016, the Board adopted a Rights Agreement designed to protect the Company’s substantial net operating loss carryforwards. Under the Rights Agreement, company stockholders of record as of December 15, 2016 received one preferred share purchase right for each share of common stock they owned on such date. If a person or group acquires beneficial ownership of 4.9% or more of the Company’s outstanding common stock (subject to certain specified exceptions), the rights will become exercisable. The rights will also become exercisable if a person or group that already owns 4.9% or more of the Company’s outstanding common stock acquires an additional 1% or more of the Company’s outstanding common stock.

The Company entered into Amendment No. 1, dated January 30, 2017, to the Rights Agreement. This amendment amends the definition of Acquiring Person in the Rights Agreement to exclude any member of the Hale Group (Hale Partnership Fund, LP and certain affiliates that are parties to the agreement (Hale Agreement) dated January 30, 2017 with the Company), provided that any purchases made by members of the Hale Group after December 5, 2016 are made in compliance with Section 1(h) of the Hale Agreement. The Company entered into Amendment No 2, dated December 5, 2019, to the Rights Agreement. This amendment amends the definition of “Expiration Time” to provide that, unless otherwise expiring under the terms of the existing definition, the Rights Agreement will expire (i) at the close of business on the day after the Company’s 2020 annual meeting of stockholders unless the Company’s stockholders approve the amendment to the definition of “Expiration Time” in this amendment or (ii) the close of business on December 5, 2022 (unless the Company’s NOLs are utilized prior to that date). At the Company’s 2020 annual meeting of stockholders, the Company’s stockholders approved the amendment to the definition of “Expiration Time” under Amendment No. 2.

If the rights become exercisable, all holders of rights, other than the person or group triggering the rights, will be entitled to purchase Company common stock at a 50% discount. Rights held by the person or group triggering the rights will become void and will not be exercisable. The rights have a de minimis fair value and trade with the Company’s common stock. The Board may amend the Rights Agreement in any way or redeem the rights at any time unless and until the rights are triggered.

The Rights Agreement includes a procedure for the Board to consider requests to exempt a particular transaction from triggering the exercisability of the rights under the Rights Agreement if the transaction (i) does not (x) create a significant risk of the Company’s NOLs being impaired or (y) constitute a default under the change-in-control covenant included in the Company’s credit facility or (ii) is otherwise in the best interests of the Company.

8.       Stock Based Compensation

The Stanley Furniture Company, Inc. 2012 Incentive Compensation Plan (Incentive Compensation Plan) provides for the granting of performance grants, performance shares, stock options, restricted stock, restricted stock units, and stock appreciation rights to employees and certain service providers. Under this plan, the aggregate number of common shares that may be issued through awards of any form is 1.6 million. In addition, shares authorized under the 2008 Incentive Compensation Plan are also available for issuance under the Incentive Compensation Plan if they are unissued or subsequently expire, are forfeited or terminate unexercised. As of December 2020, there are 1.2 million shares remaining available for future issuance under equity compensation plans.

F-16

Stock Options      

The options are issued at market value on the date of grant and have a term of 10 years from the grant date. In general, employee grants vest ratably over a four to five-year period and Director grants vest after one year. The fair value of each option is amortized into compensation expense on a straight-line basis between the grant date for the option and each vesting date. We have estimated the fair value of all stock option awards as of the date of the grant by applying the Black-Scholes pricing valuation model.

The application of this valuation model involves assumptions that are judgmental and sensitive in the determination of compensation expense. No options were granted in 2020 or 2019.

Stock option activity for the two years ended December 31, 2020, follows:

	Number of shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2019		63,197		$	7.01		1.8
Cancelled/Forfeited		(20,914	)	$	8.64
Outstanding at December 31, 2019		42,283		$	6.20		.8
Cancelled/Forfeited		(36,071	)	$	5.54
Expired		(6,212	)	$	10.01
Outstanding at December 31, 2020		-		$	-		-	$	-
Exercisable at December 31, 2020		-		$	-		-	$	-

There were no stock options exercised in 2020 or 2019.

Restricted Stock      

The restricted stock awards are accounted for as “non-vested equity shares” until the awards vest or are forfeited. In general, restricted stock awards for employees are time vested or performance vested and for non-employee directors vest at the end of their current term on the Board. The fair value of each share of restricted stock is the market price of our stock on the grant date. The fair value of each time vested award is amortized into compensation expense on a straight-line basis between the award date and the vesting date. Performance based awards are amortized into stock compensation expense based on the probability of meeting the performance criteria. In 2020 and 2019, 12,931 and 30,354 of restricted stock awards vested and were released, respectively.

The following table summarizes information about restricted stock awards for the two years ended December 31, 2020:

	Number of shares			Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2019		204,575		$	0.83
Vested		(30,354	)		1.81
Granted		416,666			0.60
Cancelled/Forfeited/Expired		(161,290	)		0.62
Outstanding at December 31, 2019		429,597		$	0.61
Vested		(12,931	)		1.16
Granted		-			-
Cancelled/Forfeited/Expired		-			-
Outstanding at December 31, 2020		416,666		$	0.60

F-17

As of December 31, 2020, there was $124,000 of total unrecognized compensation cost related to non-vested restricted stock awards, which is expected to be recognized over a weighted-average remaining vesting period of 1.5 years.

9.      Income for Continued Dumping and Subsidy Offset Act (CDSOA)

The CDSOA provides for distribution of monies collected by U.S. Customs and Border Protection (Customs) for imports covered by antidumping duty orders entering the United States through September 30, 2007 to qualified domestic producers. In 2020 and 2019, we received $0 and $1.2 million, respectively, in distributions of funds collected on antidumping duty orders entering the United States prior to September 2007.

10.     Commitments and Contingencies

Our leased facility includes our corporate office space. The lease for office space is month to month. Rental expense charged to operations was $29,000 and $29,000 in 2020 and 2019, respectively.

We currently have letters of credit to cover estimated exposures, most notably with workman’s compensation claims. This agreement requires us to maintain a compensating balance with the issuer for the amounts outstanding. We currently have letters of credit outstanding in the amount of $230,000. The compensating balance amount is reflected as restricted cash on the balance sheet.

In the normal course of business, we are involved in claims and lawsuits, none of which currently, in management’s opinion, will have a material adverse effect on our Financial Statements.

11.     Uncertainties

On March 11, 2020, the World Health Organization declared the current COVID-19 outbreak to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy.

As a result of these measures, many non-essential retail commerce across the country experienced significant disruption causing severely reduced sales volume.  Stone & Leigh, who distributes its products through these potentially impacted retail channels, has experienced and may continue to experience a reduction in sales volume as a result of these measures.  Whereas most state and local governments have begun to ease restrictions on commercial retail activity, it is possible that a resurgence in COVID-19 cases could prompt a return to tighter restrictions in certain areas of the country. Furthermore, the economic recession brought on by the pandemic may have a continuing adverse impact on consumer demand for Stone & Leigh’s products. Therefore, uncertainty remains regarding the ongoing impact of the COVID-19 outbreak upon the future results of operations of Stone & Leigh and its corresponding impact to the collectability of the S&L Note.

Despite the restrictions and measures by federal, state, and local governments in response to COVID-19, many of the U.S. Government tenant agencies of HC Realty’s properties were deemed essential.  All of HC Realty’s revenue is generated through the receipt of rental payments from U.S. Government tenant agencies.  The extent, however, of future COVID-19 disruption is highly uncertain and cannot be predicted. It is possible that with a resurgence in COVID-19 cases resulting in tighter restriction that risks to HC Realty’s operations become heightened. 

F-18

The Company continues to evaluate the impact of these measures on our operational and financial performance, specifically the impact on Stone & Leigh and HC Realty’s operations.  While, the Company has not experienced any adverse impacts with respect to the payment of interest on the S&L Note as of December 31, 2020, COVID-19 has significantly impacted S&L’s operations and its customers.  As a result of an assessment of the borrower’s financial condition, including the impact of COVID-19 to its operations, and the adequacy of the collateral securing the S&L Note, the Company determined during third quarter of 2020 that the S&L Note was other than temporarily impaired.  The Company recorded an impairment loss of $833,000 on the S&L Note during the year ended December 31, 2020.

 As of December 31, 2020, the Company has not experienced any adverse impacts to the payment of HC Realty’s common and Series B Stock dividends.

F-19

EX-21

Exhibit 21

Subsidiaries

The following is a list of subsidiaries of HG Holdings, Inc.:

NONE

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

HG Holdings, Inc.

Charlotte, North Carolina

We hereby consent to the incorporation by reference in the Registration Statements of HG Holdings, Inc. (the “Company”) on Form S-8 (Nos. 333-150369 and 333-182777) and Form S-1 (No. 333-235539) of our report dated March 1, 2021, relating to the financial statements as of December 31, 2020 and 2019 and for each of the two-year periods ended December 31, 2020, which appears in the Company’s annual report on Form 10-K. 

/s/Cherry Bekaert, LLP

Richmond, Virginia

March 1, 2021

EX-31.1

Exhibit 31.1

I, Steven A. Hale II, certify that:

1. I have reviewed this annual report on Form 10-K of HG Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 1, 2021	/s/ Steven A. Hale II
	Steven A. Hale II
	Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Brad G. Garner, certify that:

1.	I have reviewed this annual report on Form 10-K of HG Holdings, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 1, 2021	/s/ Brad G. Garner
	Brad G. Garner
	Principal Financial and Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the HG Holdings, Inc. (the “Company”) Annual Report on Form 10-K for the period ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven A. Hale II, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1). The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2). The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 1, 2021	/s/ Steven A. Hale II
	Steven A. Hale II
	Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the HG Holdings, Inc. (the “Company”) Annual Report on Form 10-K for the period ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brad G. Garner, Principal Financial and Accounting Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1). The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2). The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 1, 2021	/s/ Brad G. Garner
	Brad G. Garner
	Principal Financial and Accounting Officer

XML

Document And Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2020	Feb. 26, 2021	Jul. 01, 2020
Document Information [Line Items]
Entity Registrant Name	HG Holdings, Inc.
Entity Central Index Key	0000797465
Trading Symbol	stly
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		34,404,556
Entity Public Float			$ 13.6
Entity Shell Company	false
Document Type	10-K
Document Period End Date	Dec. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY
Amendment Flag	false
Title of 12(g) Security	Common Stock, par value $.02 per share, Preferred Stock Purchase Rights

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
ASSETS
Cash	$ 11,396	$ 2,567
Restricted cash	234	233
Interest and dividend receivables	298	91
Prepaid expenses and other current assets	139	176
Income tax receivable	488	735
Total current assets	12,555	3,802
Property, plant and equipment, net	7	7
Investment in affiliate	12,072	4,405
Subordinated notes receivable	1,883	3,379
Loan to affiliate		2,000
Other assets	509	494
Deferred tax assets		247
Total assets	27,026	14,334
LIABILITIES
Accounts payable	3	7
Accrued salaries, wages and benefits	2	5
Other accrued expenses	58	168
Total current liabilities	63	180
Other long-term liabilities	243	255
Total liabilities	306	435
STOCKHOLDERS’ EQUITY
Common stock, $0.02 par value, 35,000,000 shares authorized, 34,404,556 and 14,946,839 shares issued and outstanding on each respective date	684	294
Capital in excess of par value	29,738	17,370
Retained deficit	(3,702)	(3,765)
Total stockholders’ equity	26,720	13,899
Total liabilities and stockholders’ equity	$ 27,026	$ 14,334

XML

Consolidated Balance Sheets (Parentheticals) - $ / shares	Dec. 31, 2020	Dec. 31, 2019
Common stock, par value (in dollars per share)	$ 0.02	$ 0.02
Common stock, shares authorized (in shares)	35,000,000	35,000,000
Common stock, shares issued (in shares)	34,404,556	14,946,839
Common stock, shares outstanding (in shares)	34,404,556	14,946,839

XML

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Operating Expenses
General and administrative expenses	$ (1,304)	$ (1,133)
Total operating expenses	(1,304)	(1,133)
Interest income	608	1,039
Dividend income	684	157
Gain on sale of closely held stock		120
Gain on extinguishment of subordinated note receivable	1,326
Loss from affiliate	(418)	(430)
Income from Continued Dumping and Subsidy Offset Act, net	0	1,230
Impairment loss	(833)	(897)
Income from operations before income taxes	63	86
Income tax benefit		84
Net income	$ 63	$ 170
Basic and diluted income per share:
Net income (in dollars per share)	$ 0	$ 0.01
Weighted average shares outstanding:
Basic (in shares)	25,004	14,507
Diluted (in shares)	25,421	14,937

XML

Consolidated Statements of Changes in Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Dec. 31, 2018	14,712
Balance at Dec. 31, 2018	$ 294	$ 17,285	$ (3,935)	$ 13,644
Net income			170	170
Restricted stock forfeited or expired (in shares)	(182)
Restricted stock forfeited or expired
Stock-based compensation (in shares)	417
Stock-based compensation		85		85
Balance (in shares) at Dec. 31, 2019	14,947
Balance at Dec. 31, 2019	$ 294	17,370	(3,765)	13,899
Net income			63	63
Stock-based compensation (in shares)
Stock-based compensation		83		83
Issuance of common stock (in shares)	19,500
Issuance of common stock	$ 390	12,285		12,675
Options forfeited or expired (in shares)	(42)
Balance (in shares) at Dec. 31, 2020	34,405
Balance at Dec. 31, 2020	$ 684	$ 29,738	$ (3,702)	$ 26,720

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Income from continuing operations	$ 63	$ 170
Adjustments to reconcile net income from operations to net cash flows from operating activities:
Depreciation expense	3	2
Accretion income on notes receivable	(104)	(217)
Stock compensation expense	83	85
Gain on extinguishment of subordinated note receivable	(1,326)
Gain on sale of closely held stock		(120)
Paid in kind interest on subordinated note receivable	(25)
Impairment loss on subordinated note receivable	833	897
Dividends on HC Realty common stock	165	124
Loss from affiliate	418	430
Changes in assets and liabilities:
Prepaid expenses and other current assets	37	47
Interest and dividend receivables	(207)
Income tax receivables	247	(247)
Deferred tax assets and other assets	232	232
Accounts payable	(4)	(22)
Accrued salaries and other accrued expenses	(113)	46
Other long-term liabilities	(12)	(32)
Net cash provided by continuing operations	290	1,395
Cash flows from investing activities:
Purchase of property, plant and equipment	(3)
Investment in affiliate	(8,250)	(5,000)
New advances on loan receivable from affiliate		(2,000)
Principal payments received on subordinated secured notes receivable	2,118	1,824
Principal repayments on loan receivable from affiliate	2,000
Proceeds from sale of closely held stock		120
Net cash used by investing activities	(4,135)	(5,056)
Cash flows from financing activities:
Proceeds from Issuance of Common Stock	12,675
Net cash provided by financing activities	12,675
Net increase (decrease) in cash and restricted cash	8,830	(3,661)
Cash and restricted cash at beginning of period	2,800	6,461
Cash and restricted cash at end of period	11,630	2,800
Cash	11,396	2,567
Restricted cash	234	233
Cash and restricted cash	11,630	2,800
Supplemental Non-Cash Disclosures:
Dividends on investment in affiliate	$ 200	$ 150

XML

Note 1 - Significant Accounting Policies

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

1.

       

Significant Accounting Policies

Organization and Basis of Presentation

HG Holdings, Inc.'s (the “Company”) financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”).  

On 

March 2, 2018, 

we sold substantially all of our assets (the “Asset Sale”) to Stanley Furniture Company LLC, formerly Churchill Downs LLC (“Buyer”), pursuant to the terms of the Asset Purchase Agreement, dated as of

November 20, 2017, 

as amended by the First Amendment thereto dated 

January 22, 2017 (

the “Asset Purchase Agreement”). As a result of the sale, on

March 2, 2018,

the Company's Board of Directors approved an amendment to the Company's Restated Certificate of Incorporation to change the name of the Company to HG Holdings, Inc. The amendment became effective upon the filing of a Certificate of Amendment with the Secretary of State of the State of Delaware on

March 2, 2018.

As a result of the Asset Sale, the Company had and continues to have

no

revenue-generating operations. On

March 19, 2019,

we purchased

300,000

shares of HC Realty's Common Stock (the “HC Common Stock”) for an aggregate purchase price of

$3,000,000

and

200,000

shares of HC Realty's

10.00%

Series B Cumulative Convertible Preferred Stock (the “HC Series B Stock”) for an aggregate purchase price of

$2,000,000.

On

April 3,

April 9,

and

June 29, 2020,

the Company entered into subscription agreements with HC Realty, pursuant to which we purchased

100,000,

250,000,

and

475,000

shares of Series B Stock, respectively, for an aggregate purchase price of

$8,250,000.

As a result of these purchases, we currently own approximately

36.4%

of the as-converted equity interest of HC Realty.

Also on

March 19, 2019,

we, together with certain other lenders, including certain entities affiliated with HPCM (collectively, the “Lenders”), entered into a loan agreement (the “Loan Agreement”) with HC Realty's operating partnership, and HCM Agency, LLC, as collateral agent (the “Agent”), pursuant to which the Lenders provided HC Realty's operating partnership with a

$10,500,000

senior secured term loan (the “Initial Term Loan”), of which

$2,000,000

was provided by us. On

August 14, 2020,

pursuant to the terms of the Loan Agreement, HC Realty's operating partnership repaid the loan in full, including all accrued interest and make whole interest.

As a result of these investments, our sources of income include dividends on HC Realty Series B Stock and interest paid on cash and subordinated secured promissory notes.  The Company believes that the revenue generating from these sources in addition to the cash on hand is sufficient to fund operating expenses for at least

12

months from the date of these financial statements.  On

June 19, 2020,

the Company raised

$12,675,000,

the maximum gross proceeds possible, through its rights offering (the “Rights Offering”) which concluded on

June 19, 2020.

Pursuant to the Rights Offering, the Company distributed non-transferable rights to purchase

19,500,000

shares of its common stock at a purchase price of

$0.65

per share to stockholders of record as of

May 18, 2020.

As a result of the rights offering, the Company issued

19,500,000

new shares of common stock.  On

June 29, 2020,

the Company used

$4.75

million of the proceeds of the rights offering to purchase additional HC Realty Series B Stock.  The Company intends to use the remaining proceeds of the Rights Offering to provide additional cash for acquisitions, which

may

include purchasing additional HC Series B Stock, HC Common Stock or debt of HC Realty.

Cash

We consider all highly liquid investments with a maturity of

three

months or less when purchased to be cash equivalents. 

Restricted Cash

Restricted cash includes collateral deposits required under the Company's letter of credit agreement, which expires in

June 2021,

to guarantee the Company's workers compensation insurance policy. The restricted cash balance is expected to mature over the next

six

months. As of

December 31, 2020,

there was

no

outstanding balance on the letter of credit agreement.

Concentration of Credit Risk

The Company place its cash and restricted cash with financial institutions and, at times, cash held in depository accounts

may

exceed the Federal Deposit Insurance Corporation insured limit.

Interest Income

Interest income is recorded on an accrual basis based on the effective interest rate method and includes the accretion of fair value adjustments/discounts. Fair value adjustments to par value are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of fair value adjustments, if any.

Other revenues are recognized when contractual obligations are fulfilled or as services are provided.

Payment-in-Kind Interest

The Company has subordinated secured notes receivables that

may

contain payment-in-kind (“PIK”) provisions. The PIK interest, computed at the contractual rate specified in the loan agreement, is added to the principal balance of the loan and recorded as interest income.

Variable Interest Entities

As a result of both the Asset Sale and the S&L Asset Sale, we have a variable interest in

three

entities that have been determined to be variable interest entities ("VIE"). If we conclude that we are the primary beneficiary of a VIE, we are required to consolidate it. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of significant activities and an assessment of our ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding, financing, and other applicable agreements and circumstances. Our assessments of whether we are the primary beneficiary of our VIE requires significant assumptions and judgments. We have concluded that we are

not

the primary beneficiary of the

three

VIEs as we do

not

have the power to direct the activities that most significantly impact the VIEs' economic performance and therefore are

not

required to consolidate these entities.

Subordinated

Note

s

Receivable

In accordance with ASC

810

-

40

-

5,

upon the sale of substantially all of the assets the Company recorded a gain on the deconsolidation of a group of assets based on the difference between the fair value of the consideration received and the carrying amount of the group of assets. As the Original Note was part of the consideration received, the Company recorded the Original Note at its fair value on

March 2, 2018.

The fair value of the Original Note was estimated using discounted cash flow analyses, using market rates at the acquisition date that reflect the credit and inherent rate-risk inherent in the Original Note. The discount resulting from the fair value adjustment was recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method. As of the date of the assignment and transfer from the Buyer to S&L, it was determined that the Original Note was extinguished and therefore both the A&R Note and the S&L Note were measured based on their fair value in accordance with Emerging Issues Task Force (EITF) –

Creditors Accounting for Modification or Exchange of Debt Instruments.

  The discounts resulting from the fair value adjustments for the A&R Note and the S&L Note were recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method.  When impairment is determined to be probable, the measurement will be based on the fair value of the collateral securing the notes.  The determination of impairment involves management's judgment and the use of market and

third

-party estimates regarding collateral values.  During

2020

management determined that S&L Note was other than temporarily impaired and recorded an impairment loss of

$833,000.

Property, Plant and Equipment

Depreciation of property, plant and equipment is computed using the straight-line method based upon the estimated useful lives. Depreciation expense is charged to general and administrative expenses. Gains and losses related to dispositions and retirements are included in income. Maintenance and repairs are charged to expense as incurred; renewals and betterments are capitalized. Assets are reviewed for possible impairment when events indicate that the carrying amount of an asset

may

not

be recoverable. Assumptions and estimates used in the evaluation of impairment

may

affect the carrying value of property, plant and equipment, which could result in impairment charges in future periods. Our depreciation policy reflects judgments on the estimated useful lives of assets. Our long-lived assets were tested for impairment at

December 31, 2020

and determined that the long-lived assets were

not

impaired.

Equity Investments

Long-term investments consist of investments in equity securities where our ownership is less than

50%

and the Company has the ability to exercise significant influence, but

not

control, over the investee.  These investments are classified in “Investment in affiliate” on the balance sheets.  Investments accounted for under the equity method of accounting are initially recorded at cost and subsequently increases or decreases the investment by its proportionate share of the net income or loss and other comprehensive income or loss of the investee. For investments that do

not

have a readily determinable fair value, the Company made an accounting policy election for a measurement alternative.   Upon adoption of ASU

2016

-

01,

the Company carries these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transaction for the identical or a similar investment of the same issuer. The Company reviews its equity securities without readily determinable fair values on a regular basis to determine if the investment is impaired. For purposes of this assessment, the Company considers the investee's cash position, liquidity, earnings and revenue outlook, equity position, and ownership, among other factors, in its review.  If management's assessment indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes in current earnings an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount.

Income Taxes

Deferred income taxes are determined based on the difference between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.  Deferred tax expense represents the change in the deferred tax asset/liability balance. Income tax credits are reported as a reduction of income tax expense in the year in which the credits are generated.  A valuation allowance is recorded when it is more likely than

not

that a deferred tax asset will

not

be realized.  Interest and penalties on uncertain tax positions are recorded as income tax expense.

Fair Value of Financial Instruments

Accounting for fair value measurements requires disclosure of the level within the fair value hierarchy in which fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level

1

), significant other observable inputs (Level

2

), and significant unobservable inputs (Level

3

). The fair value of receivables and payables approximate the carrying amount because of the short maturity of these instruments.

Earnings per Common Share

Basic earnings per share is computed based on the weighted average number of common shares outstanding. Diluted earnings per share includes any dilutive effect of outstanding stock options and restricted stock calculated using the treasury stock method.

Stock-Based Compensation

We record share-based payment awards at fair value on the grant date of the awards, based on the estimated number of awards that are expected to vest, over the vesting period. The fair value of stock options was determined using the Black-Scholes option-pricing model. The fair value of the restricted stock awards was based on the closing price of the Company's common stock on the date of the grant. For awards with performance conditions, we recognize compensation cost over the expected period to achieve the performance conditions, provided achievement of the performance conditions are deemed probable.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Changes in such estimates

may

affect amounts reported in future periods.

New Accounting Pronouncements

In

June 2016,

the Financial Accounting Standards Board (“FASB”) issued ASU

2016

-

13,

Financial Instruments – Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments

(“ASU

2016

-

13”

).  The amendments in ASU

2016

-

13

require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  In addition, ASU

2016

-

13

amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.  The amendment is effective for public entities for annual reporting periods beginning after

December 15, 2022,

however early application is permitted for reporting periods beginning after

December 15, 2018. 

The Company does

not

anticipate the adoption of ASU

2016

-

13

to have a material impact to the financial statements.

XML

Note 2 - Property, Plant and Equipment

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

2.

     

Property, Plant and Equipment

	Depreciable
	lives			(in thousands)
	(in years)			2020		201 9
Computers and equipment	3	to	7	$	10	$	7
Furniture and fixtures	5	to	7		3		3
Property, plant and equipment, at cost					13		10
Less accumulated depreciation					6		3
Property, plant and equipment, net				$	7	$	7

XML

Note 3 - Subordinated Notes Receivable

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

3.

     

Subordinated Notes Receivable

The Company received a

$7.4

million subordinated secured promissory note from the Buyer as partial consideration for the sale of substantially all of our assets during the

first

quarter of

2018.

On

September 6, 2018,

the Buyer sold certain of its assets, including certain inventory and the Stone & Leigh tradename to S&L, which is owned by a group which includes Matthew W. Smith, the Company's former interim Chief Executive Officer. As a part of the S&L Asset Sale, the Buyer assigned to S&L certain of its rights and obligations under the original

$7.4

million subordinated secured promissory note. In connection with the assignment, the Company entered into an Amended and Restated Subordinated Secured promissory note with the Buyer (the “A&R Note”) and a new Subordinated Secured Promissory Note with S&L (the “S&L Note”). The A&R Note had a principal amount as of the assignment date of

$3.3

million.

A&R Note

On

February 7, 2019,

the Company, Buyer and related parties entered into a Consent, Reaffirmation, and Joinder (the “Consent”) in connection with a new senior credit facility that Buyer expected to enter into with Alterna Capital Solutions, LLC (“Alterna”).  Pursuant to the Consent, Buyer delivered a Second Amended and Restated Subordinated Secured Promissory Note (the “Second A&R Note”) in favor of the Company. The Second A&R Note had a principal amount of

$3.2

million and remained payable

no

later than

March 2, 2023,

at which time the total principal amount was due. Interest on the principal balance of the note continued to accrue daily at an annual fixed rate of

6%.

The other terms of the Second A&R Note were substantially the same as those of the A&R Note. The Second A&R Note was guaranteed by Stanley Intermediate Holdings LLC, formerly Churchill Downs Intermediate Holdings LLC. Pursuant to the Consent, Buyer's British Virgin Island parent company also guaranteed the Second A&R Note.

On

February 25, 2019,

Buyer closed and funded its new senior credit facility with Alterna. Pursuant to the Consent, the Company entered into an Intercreditor and Debt Subordination Agreement, dated

February 25, 2019 (

the “Subordination Agreement”), with Alterna. The Subordination Agreement with Alterna was generally on the same terms as the subordination agreement the Company previously entered into with North Mill Capital, LLC in connection with the original subordinated secured promissory note dated

March 2, 2018

from Buyer in favor of the Company, except that principal payments on the Second A&R Note, before satisfaction of the of indebtedness to Alterna and termination of the Subordination Agreement, were conditioned upon (l)

no

event of default under the new senior credit facility existing or resulting from the payment,  (

2

) availability under the new senior credit facility to make the payment, (

3

) all tax and debt obligations of Buyer being current and within their terms, and (

4

) there being

no

delinquency in payables or other obligations of Buyer to specified critical vendors.

Despite Buyer paying interest quarterly in advance on the Second A&R Note, the Company concluded during the

second

quarter of

2019,

based on the then current information and events in the Buyer's business, that the Company did

not

believe it would be able to collect the entire amount due according to the Second A&R Note and determined that the note was other than temporarily impaired. The evaluation was generally based on an assessment of the borrower's financial condition and the adequacy of the collateral securing the Second A&R Note. Given the facts and circumstances present during the

second

quarter of

2019,

the Company recorded an impairment loss of

$897,000

in the

second

quarter of

2019

resulting in the carrying value of the A&R Note decreasing to

$1.3

million as of

June 30, 2019.

On

August 21, 2019,

the Company delivered a notice of default to Buyer under the Second A&R Note. The Company delivered this notice after receiving information from Alterna that Buyer was then in default under its credit facility with Alterna.

On

October 31, 2019,

the Company entered into a Forbearance Agreement with the Buyer and certain affiliates (the “Loan Parties”) pursuant to which the Company agreed, subject to certain conditions, to forbear until

February 24, 2020

from exercising its rights and remedies under the Second A&R Note issued by Buyer to the Company. On

February 24, 2020,

the Company and the Loan Parties entered into a letter agreement (the “Forbearance Extension Letter Agreement”) extended the outside termination date for the forbearance period under the Forbearance Agreement from

February 24, 2020

to

February 26, 2020.

The other terms and conditions of the Forbearance Agreement remained the same. The forbearance period terminated on

February 26, 2020

under the terms of the Forbearance Extension Letter Agreement and Forbearance Agreement.

The Company received payments on

January 31, 2020,

February 28, 2020,

and

March 4, 2020

of

$130,000,

$200,000

and

$350,000,

respectively, of the principal amount on the Second A&R Note from the Buyer.

On

March 6, 2020,

the Company and the Loan Parties entered into a letter agreement (the “Second Forbearance Extension Letter Agreement”) extended, subject to certain conditions, the outside termination date from

February 26, 2020

to

March 17, 2020.

The extension of the outside termination and the effectiveness of the Second Forbearance Extension Letter Agreement was conditioned on Buyer making payments to be applied to the outstanding principal balance of the Second A&R Note of

$250,000

on or before

March 12, 2020

and

$750,000

on or before

March 13, 2020.

The Second Forbearance Extension Letter Agreement also required the Buyer to make an additional

$391,970

payment on or before

March 17, 2020

to be applied to the outstanding principal balance of the Second A&R Note. The other terms and conditions of the Forbearance Agreement remained the same.

On

March 12

and

13,

2020,

the Company received payments from Buyer of

$250,000

and

$750,000,

respectively, pursuant to the Second Forbearance Extension Letter Agreement which payments were applied to the outstanding principal amount of the Second A&R Note.

On

March 16, 2020,

the Company received payment of

$392,000

from the Buyer resulting in satisfaction in full of the Second A&R Note pursuant to the terms of the Forbearance Agreement as amended. As a result of the payments received from Buyer in the

first

quarter of

2020

on the Second A&R Note, the Company recognized a gain of

$1.3

million on the payoff of the Second A&R Note during the

first

quarter of

2020.

The Company did

not

receive any cash interest payments during the year ended

December 31, 2020

as interest for the quarter was paid in advance on

December 31, 2019

and recorded as a principal payment.

A reconciliation of the activity in the Second A&R Note for the years ended

December 31, 2020

and

2019

is as follows (in thousands):

	Principal			Discount			Balance
Balance at January 1, 2019	$	3,376		$	(1,012	)	$	2,364
Principal payments		(812	)		-			(812	)
Impairment		-			(897	)		(897	)
Accretion of discount		-			54			54
Balance at December 31, 2019	$	2,564		$	(1,855	)	$	709
Interest paid-in-kind		25			-			25
Gain on settlement of debt		(529	)		1,855			1,326
Principal payments		(2,060	)		-			(2,060	)
Balance at December 31, 2020	$	-		$	-		$	-

S&L Note

The S&L Note had a principal amount of

$4.4

million as of the assignment date. The S&L Note matures on

March 2, 2023,

at which time the total principal amount is due. Interest on the S&L Note accrues at a fixed rate of

10%

per annum. Cash interest payments of

$252,000

and

$356,000

were accrued or received during the years ended

December 31, 2020

and

2019,

respectively. During the years ended

December 31, 2020

and

2019,

the Company received

$58,000

and

$1,011,000

of principal payments on the S&L Note, respectively.

At the assignment date, the Company evaluated the fair value of the S&L Note. The Company recorded accreted interest income on the fair value adjustment of the S&L Note of

$104,000

and

$163,000

for the years ended

December 31, 2020

and

2019,

respectively.

The Company recorded an impairment loss of

$833,000

and

$0

during the years ended

December 31, 2020

and

2019.

  Accordingly, the Company ceased accruing interest and accreting interest income on the fair value discount of the S&L Note on the date in the

third

quarter of

2020

the Company determined the note was other than temporarily impaired.  The Company recognized the interest payments of

$58,000

received in the

fourth

quarter

2020

as reductions of the principal balance of the S&L Note.  

As of

December 31, 2020,

the Company concluded that the estimated fair market value of the S&L Note will provide adequate cash required to repay the

$1.9

million carrying value of the S&L Note.  The Company's estimated fair value of the S&L Note is based upon the estimated fair value of the collateral securing the note, namely cash, accounts receivables, and inventory.  The determination of fair value involves management's judgment, including analysis of the impact of COVID-

19

on S&L's business and its customers, and the use of market and

third

-party estimates regarding collateral values.  These collateral value estimates are based on the

three

-level valuation hierarchy for fair value for fair value measurement and represent Level

1

and

2

inputs.  Level

1

inputs are quoted prices in active markets for identical assets or liabilities.  Level

2

inputs are inputs other than quoted prices included within Level

1

that are observable for the asset or liability, either directly or indirectly. 

A reconciliation of the activity in the S&L Note for the years ended

December 31, 2020

and

2019

is as follows (in thousands):

	Principal			Discount			Balance
Balance at January 1, 2019	$	4,340		$	(822	)	$	3,518
Principal payments		(1,011	)		-			(1,011	)
Accretion of discount		-			163			163
Balance at December 31, 2019	$	3,329		$	(659	)	$	2,670
Principal payments		(58	)		-			(58	)
Accretion of discount		-			104			104
Impairment		-			(833	)		(833	)
Balance at December 31, 2020	$	3,271		$	(1,388	)	$	1,883

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Note 4 - Loan to Affiliate

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Investments in and Advances to Affiliates, Schedule of Investments [Text Block]

4.

      

Loan to Affiliate

On

March 19, 2019,

the Company, together with certain other Lenders, entered into a loan agreement (the “Loan Agreement”) with HC Realty's operating partnership, and HCM Agency, LLC, as collateral agent (the “Agent”), pursuant to which the Lenders provided HC Realty's operating partnership with a

$10,500,000

senior secured term loan (the “Initial Term Loan”), of which

$2,000,000

was provided by the Company.

The Loan Agreement was to mature on

March 19, 2022. 

Interest on the Loan Agreement accrued at a rate of

14%

per annum. 

On

August 14, 2020,

pursuant to the terms of the Loan Agreement, HC Realty's operating partnership repaid the loan in full, including all accrued interest and make whole interest. Interest earned for the years ended

December 31, 2020

and

2019

was

$204,000

and

$223,000,

respectively.

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Note 5 - Investment in Affiliate

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Equity Method Investments and Joint Ventures Disclosure [Text Block]

5.

      

Investment in Affiliate

On

March 19, 2019,

the Company entered into subscription agreements with HC Realty, pursuant to which it purchased (i)

200,000

shares of HC Realty's

10.00%

Series B Cumulative Convertible Preferred Stock (the “Series B Stock”) for an aggregate purchase price of

$2,000,000

and (ii)

300,000

shares of HC Realty's common stock for an aggregate purchase price of

$3,000,000.

Certain investors affiliated with HPCM purchased an additional

850,000

shares of Series B Stock for an aggregate purchase price of

$8,500,000.

On

April 3,

April 9,

and

June 29, 2020,

the Company entered into subscription agreements with HC Realty, pursuant to which we purchased

100,000,

250,000,

and

475,000

shares of Series B Stock, respectively, for an aggregate purchase price of

$8,250,000.

While some of these investors have other investments with HPCM, each of these investors made a separate and direct investment in HC Realty and HPCM does

not

receive management fees, performance fees, or any other economic benefits with respect to these investors' investment in HC Realty's Series B Stock.

The Series B Stock is

not

deemed to be in-substance common stock and is accounted for using the measurement alternative for equity investments with

no

readily determinable fair value. The Series B Stock will be reported at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar investments issued by HC Realty.

The following table summarizes the Company's investment in HC Realty as of the

two

years ended

December 31, 2020 (

in thousands):

	Ownership %						Investment in Affiliate Balance				Loss recorded in the Consolidated Statements of Operations (b)
	December 31, 2020			December 31, 2019			December 31, 2020		December 31, 2019		2020			2019
HC Realty Series B Stock (a)		28.7	%		7.9	%	$	10,250	$	2,000	$	-		$	-
HC Realty common stock		7.7	%		8.5	%		1,822		2,405		(418	)		(430	)
Total		36.4	%		16.4	%	$	12,072	$	4,405	$	(418	)	$	(430	)

(a) Represents investments in shares of HC Realty preferred stock with a basis of $10.25 million. Each share of preferred stock can be converted into one share of HC Realty common stock at a conversion price equal to the lesser of $9.10 per share or the fair market value per share of HC Realty common stock, subject to adjustment upon the occurrence of certain events.

(b) Loss from these investments is included in “Loss from affiliate” in the statements of operations. Since HC Realty is a Real Estate Investment Trust and not a taxable entity, the loss is not reported net of taxes.

The Company's investment in HC Realty common stock is accounted for under the equity method of accounting. For portions of the year ended

December 31, 2020,

the Company owned less than

20%

of the fully diluted shares outstanding. The Company determined that accounting for the investment in HC Realty common stock under the equity method was appropriate for the portion of time the Company owned less than

20%

because the Company holds significant influence of HC Realty.

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Note 6 - Income Taxes

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

6.

     

Income Taxes

The provision for income tax (benefit) expense consists of (in thousands):

	20 20			2019
Current:
Federal	$	(247	)	$	-
State		-			(84	)
Total current		(247	)		(84	)
Deferred:
Federal		247			-
State		-			-
Total deferred		247			-
Income tax (benefit) expense from continuing operations	$	-		$	(84	)

A reconciliation of the difference between the federal statutory income tax rate and the effective income tax rate follows:

	2020			2019
Federal statutory rate		21.0	%		21.0	%
State tax, net of federal benefit		(0.1	)		3.8
Deferred correction – State NOLs		(359.7	)		(122.7	)
Permanent differences		2.3			-
Valuation allowance increase		360.4			(3.9	)
Other, net		(24.0	)		4.3
Effective income tax rate		-	%		(97.6	)%

The income tax effects of temporary differences that comprise deferred tax assets and liabilities at

December 31

follow (in thousands):

	2020			2019
Noncurrent deferred tax assets:
Equity method investment	$	195		$	99
Other accrued expenses		33			32
Notes receivable fair value adjustment		319			578
Employee benefits		50			65
Capital loss carryforward		11			-
AMT credit		-			247
Net operating loss		7,861			7,726
Gross non-current deferred tax assets		8,469			8,747
Noncurrent deferred tax liabilities:
Property, tax, and equipment	$	(1	)	$	(1	)
Non-taxable dividends		(193	)		-
Valuation allowance		(8,275	)		(8,499	)
Gross non-current deferred tax liabilities		(8,469	)		(8,500	)
Net noncurrent deferred tax assets	$	-		$	247

We have U.S. federal net operating loss carryforwards of approximately

$35.3

million which are available to reduce future taxable income. The federal net operating loss will begin expiring in

2033.

We have combined state net operating loss carryforwards of

$22.5

million that will expire at various times beginning in

2027.

During

2020,

we recorded a non-cash credit to our valuation allowance of approximately

$226,000

against our

December 31, 2020

deferred tax assets.  The primary assets which are covered by this valuation allowance are employee benefits and net operating losses in excess of the amounts which can be carried back to prior periods. The valuation allowance was calculated in accordance with the provisions of ASC

740,

Income Taxes

, which requires an assessment of both positive and negative evidence when measuring the need for a valuation allowance.  Our results over the most recent

four

-year period were heavily affected by our business restructuring activities. Our cumulative loss represented sufficient negative evidence to require a valuation allowance.  We intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal, resulting in

no

deferred tax asset balance being recognized.  Should we determine that we will

not

be able to realize all or part of our deferred tax asset in the future, an adjustment to the deferred tax asset will be charged to income in the period such determination is made. 

The unrecognized tax benefits activity for the year ended

December 31

follows (in thousands):

	20 20		20 19
Unrecognized tax benefits balance at January 1	$	157	$	241
Gross decrease in tax positions of prior years		-		(84	)
Unrecognized tax benefits balance at December 31	$	157	$	157

Total amount of unrecognized tax benefits that would affect our effective tax rate if recognized is

$157,000

at

December 31, 2020

and

2019.

The

2013

through

2019

tax years remain open to examination by major taxing jurisdictions.   

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Note 7 - Stockholders' Equity

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

7.

       

Stockholders' Equity

In addition to common stock, authorized capital includes

1,000,000

shares of “blank check” preferred stock.

None

was outstanding during the

two

years ended

December 31, 2020.

The Board of Directors (“Board”) is authorized to issue such stock in series and to fix the designation, powers, preferences, rights, limitations and restrictions with respect to any series of such shares. Such “blank check” preferred stock

may

rank prior to common stock as to dividend rights, liquidation preferences or both,

may

have full or limited voting rights and

may

be convertible into shares of common stock.

Basic and diluted earnings per share are calculated using the following share data (in thousands):

	20 20		2019
Weighted average shares outstanding for basic calculation		25,004		14,507
Dilutive effect of restricted stock		417		430
Weighted average shares outstanding for diluted calculation		25,421		14,937

For the year ended

December 31, 2020

there were

no

stock awards excluded from the diluted per share calculation. For the year ended

December 31, 2019,

approximately

42,000

stock awards were excluded from the diluted per share calculation as they would be anti-dilutive.

From time to time, we will repurchase common shares that are tendered by recipients of restricted stock awards to satisfy tax withholding obligations on vested restricted stock. There were

no

repurchases during

2020

or

2019.

In

July 2012,

the Board authorized the purchase of up to

$5.0

million of our common stock. These repurchases

may

be made from time to time in the open market, in privately negotiated transactions, or otherwise, at prices the Company deems appropriate.

No

repurchases of our common stock were made in

2020

or

2019.

The Board does

not

intend to repurchase any additional shares of our common stock under this authorization.

In the

fourth

quarter of

2016,

the Board adopted a Rights Agreement designed to protect the Company's substantial net operating loss carryforwards. Under the Rights Agreement, company stockholders of record as of

December 15, 2016

received

one

preferred share purchase right for each share of common stock they owned on such date. If a person or group acquires beneficial ownership of

4.9%

or more of the Company's outstanding common stock (subject to certain specified exceptions), the rights will become exercisable. The rights will also become exercisable if a person or group that already owns

4.9%

or more of the Company's outstanding common stock acquires an additional

1%

or more of the Company's outstanding common stock.

The Company entered into Amendment

No.

 

1,

dated

January 

30,

2017,

to the Rights Agreement. This amendment amends the definition of Acquiring Person in the Rights Agreement to exclude any member of the Hale Group (Hale Partnership Fund, LP and certain affiliates that are parties to the agreement (Hale Agreement) dated

January 

30,

2017

with the Company), provided that any purchases made by members of the Hale Group after

December 

5,

2016

are made in compliance with Section

1

(h) of the Hale Agreement. The Company entered into Amendment

No

2,

dated

December 5, 2019,

to the Rights Agreement. This amendment amends the definition of “Expiration Time” to provide that, unless otherwise expiring under the terms of the existing definition, the Rights Agreement will expire (i) at the close of business on the day after the Company's

2020

annual meeting of stockholders unless the Company's stockholders approve the amendment to the definition of “Expiration Time” in this amendment or (ii) the close of business on

December 5, 2022 (

unless the Company's NOLs are utilized prior to that date). At the Company's

2020

annual meeting of stockholders, the Company's stockholders approved the amendment to the definition of “Expiration Time” under Amendment

No.

2.

If the rights become exercisable, all holders of rights, other than the person or group triggering the rights, will be entitled to purchase Company common stock at a

50%

discount. Rights held by the person or group triggering the rights will become void and will

not

be exercisable. The rights have a de minimis fair value and trade with the Company's common stock. The Board

may

amend the Rights Agreement in any way or redeem the rights at any time unless and until the rights are triggered.

The Rights Agreement includes a procedure for the Board to consider requests to exempt a particular transaction from triggering the exercisability of the rights under the Rights Agreement if the transaction (i) does

not

(

x

) create a significant risk of the Company's NOLs being impaired or (y) constitute a default under the change-in-control covenant included in the Company's credit facility or (ii) is otherwise in the best interests of the Company.

XML

Note 8 - Stock Based Compensation

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

8.

       

Stock Based Compensation

The Stanley Furniture Company, Inc.

2012

Incentive Compensation Plan (Incentive Compensation Plan) provides for the granting of performance grants, performance shares, stock options, restricted stock, restricted stock units, and stock appreciation rights to employees and certain service providers. Under this plan, the aggregate number of common shares that

may

be issued through awards of any form is

1.6

million. In addition, shares authorized under the

2008

Incentive Compensation Plan are also available for issuance under the Incentive Compensation Plan if they are unissued or subsequently expire, are forfeited or terminate unexercised. As of

December 2020,

there are

1.2

million shares remaining available for future issuance under equity compensation plans.

Stock Options

      

The options are issued at market value on the date of grant and have a term of

10

years from the grant date. In general, employee grants vest ratably over a

four

to

five

-year period and Director grants vest after

one

year. The fair value of each option is amortized into compensation expense on a straight-line basis between the grant date for the option and each vesting date. We have estimated the fair value of all stock option awards as of the date of the grant by applying the Black-Scholes pricing valuation model.

The application of this valuation model involves assumptions that are judgmental and sensitive in the determination of compensation expense.

No

options were granted in

2020

or

2019.

Stock option activity for the

two

years ended

December 31, 2020,

follows:

	Number of shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2019		63,197		$	7.01		1.8
Cancelled/Forfeited		(20,914	)	$	8.64
Outstanding at December 31, 2019		42,283		$	6.20		.8
Cancelled/Forfeited		(36,071	)	$	5.54
Expired		(6,212	)	$	10.01
Outstanding at December 31, 2020		-		$	-		-	$	-
Exercisable at December 31, 2020		-		$	-		-	$	-

There were

no

stock options exercised in

2020

or

2019.

Restricted Stock

      

The restricted stock awards are accounted for as “non-vested equity shares” until the awards vest or are forfeited. In general, restricted stock awards for employees are time vested or performance vested and for non-employee directors vest at the end of their current term on the Board. The fair value of each share of restricted stock is the market price of our stock on the grant date. The fair value of each time vested award is amortized into compensation expense on a straight-line basis between the award date and the vesting date. Performance based awards are amortized into stock compensation expense based on the probability of meeting the performance criteria. In

2020

and

2019,

12,931

and

30,354

of restricted stock awards vested and were released, respectively.

The following table summarizes information about restricted stock awards for the

two

years ended

December 31, 2020:

	Number of shares			Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2019		204,575		$	0.83
Vested		(30,354	)		1.81
Granted		416,666			0.60
Cancelled/Forfeited/Expired		(161,290	)		0.62
Outstanding at December 31, 2019		429,597		$	0.61
Vested		(12,931	)		1.16
Granted		-			-
Cancelled/Forfeited /Expired		-			-
Outstanding at December 31, 20 20		416,666		$	0.60

As of

December 31, 2020,

there was

$124,000

of total unrecognized compensation cost related to non-vested restricted stock awards, which is expected to be recognized over a weighted-average remaining vesting period of

1.5

years.

XML

Note 9 - Income for Continued Dumping and Subsidy Offset Act (CDSOA)

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Income for Continued Dumping and Subsidy Offset Act [Text Block]

9.

     

Income for Continued Dumping and Subsidy Offset Act (CDSOA)

The CDSOA provides for distribution of monies collected by U.S. Customs and Border Protection (Customs) for imports covered by antidumping duty orders entering the United States through

September 30, 2007

to qualified domestic producers. In

2020

and

2019,

we received

$0

and

$1.2

million, respectively, in distributions of funds collected on antidumping duty orders entering the United States prior to

September 2007.

XML

Note 10 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

10.

     

Commitments and Contingencies

Our leased facility includes our corporate office space. The lease for office space is month to month. Rental expense charged to operations was

$29,000

and

$29,000

in

2020

and

2019,

respectively.

We currently have letters of credit to cover estimated exposures, most notably with workman's compensation claims. This agreement requires us to maintain a compensating balance with the issuer for the amounts outstanding. We currently have letters of credit outstanding in the amount of

$230,000.

The compensating balance amount is reflected as restricted cash on the balance sheet.

In the normal course of business, we are involved in claims and lawsuits,

none

of which currently, in management's opinion, will have a material adverse effect on our Financial Statements.

XML

Note 11 - Uncertainties

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Uncertainties [Text Block]

11

.     

Uncertainties

On 

March 11, 2020, 

the World Health Organization declared the current COVID-

19

outbreak to be a global pandemic. In response to this declaration and the rapid spread of COVID-

19

 within the United States, federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy.

As a result of these measures, many non-essential retail commerce across the country experienced significant disruption causing severely reduced sales volume.  Stone & Leigh, who distributes its products through these potentially impacted retail channels, has experienced and

may

continue to experience a reduction in sales volume as a result of these measures.  Whereas most state and local governments have begun to ease restrictions on commercial retail activity, it is possible that a resurgence in COVID-

19

 cases could prompt a return to tighter restrictions in certain areas of the country. Furthermore, the economic recession brought on by the pandemic 

may 

have a continuing adverse impact on consumer demand for Stone & Leigh's products. Therefore, uncertainty remains regarding the ongoing impact of the COVID-

19

 outbreak upon the future results of operations of Stone & Leigh and its corresponding impact to the collectability of the S&L Note.

Despite the restrictions and measures by federal, state, and local governments in response to COVID-

19,

many of the U.S. Government tenant agencies of HC Realty's properties were deemed essential.  All of HC Realty's revenue is generated through the receipt of rental payments from U.S. Government tenant agencies.  The extent, however, of future COVID-

19

disruption is highly uncertain and cannot be predicted. It is possible that with a resurgence in COVID-

19

cases resulting in tighter restriction that risks to HC Realty's operations become heightened. 

The Company continues to evaluate the impact of these measures on our operational and financial performance, specifically the impact on Stone & Leigh and HC Realty's operations.  While, the Company has

not

experienced any adverse impacts with respect to the payment of interest on the S&L Note as of

December 31, 2020,

COVID-

19

has significantly impacted S&L's operations and its customers.  As a result of an assessment of the borrower's financial condition, including the impact of COVID-

19

to its operations, and the adequacy of the collateral securing the S&L Note, the Company determined during

third

quarter of

2020

that the S&L Note was other than temporarily impaired.  The Company recorded an impairment loss of

$833,000

on the S&L Note during the year ended

December 31, 2020.

 As of

December 31, 2020,

the Company has

not

experienced any adverse impacts to the payment of HC Realty's common and Series B Stock dividends.

XML

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Organization and Basis of Presentation

HG Holdings, Inc.'s (the “Company”) financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”).  

On 

March 2, 2018, 

we sold substantially all of our assets (the “Asset Sale”) to Stanley Furniture Company LLC, formerly Churchill Downs LLC (“Buyer”), pursuant to the terms of the Asset Purchase Agreement, dated as of

November 20, 2017, 

as amended by the First Amendment thereto dated 

January 22, 2017 (

the “Asset Purchase Agreement”). As a result of the sale, on

March 2, 2018,

the Company's Board of Directors approved an amendment to the Company's Restated Certificate of Incorporation to change the name of the Company to HG Holdings, Inc. The amendment became effective upon the filing of a Certificate of Amendment with the Secretary of State of the State of Delaware on

March 2, 2018.

As a result of the Asset Sale, the Company had and continues to have

no

revenue-generating operations. On

March 19, 2019,

we purchased

300,000

shares of HC Realty's Common Stock (the “HC Common Stock”) for an aggregate purchase price of

$3,000,000

and

200,000

shares of HC Realty's

10.00%

Series B Cumulative Convertible Preferred Stock (the “HC Series B Stock”) for an aggregate purchase price of

$2,000,000.

On

April 3,

April 9,

and

June 29, 2020,

the Company entered into subscription agreements with HC Realty, pursuant to which we purchased

100,000,

250,000,

and

475,000

shares of Series B Stock, respectively, for an aggregate purchase price of

$8,250,000.

As a result of these purchases, we currently own approximately

36.4%

of the as-converted equity interest of HC Realty.

Also on

March 19, 2019,

we, together with certain other lenders, including certain entities affiliated with HPCM (collectively, the “Lenders”), entered into a loan agreement (the “Loan Agreement”) with HC Realty's operating partnership, and HCM Agency, LLC, as collateral agent (the “Agent”), pursuant to which the Lenders provided HC Realty's operating partnership with a

$10,500,000

senior secured term loan (the “Initial Term Loan”), of which

$2,000,000

was provided by us. On

August 14, 2020,

pursuant to the terms of the Loan Agreement, HC Realty's operating partnership repaid the loan in full, including all accrued interest and make whole interest.

As a result of these investments, our sources of income include dividends on HC Realty Series B Stock and interest paid on cash and subordinated secured promissory notes.  The Company believes that the revenue generating from these sources in addition to the cash on hand is sufficient to fund operating expenses for at least

12

months from the date of these financial statements.  On

June 19, 2020,

the Company raised

$12,675,000,

the maximum gross proceeds possible, through its rights offering (the “Rights Offering”) which concluded on

June 19, 2020.

Pursuant to the Rights Offering, the Company distributed non-transferable rights to purchase

19,500,000

shares of its common stock at a purchase price of

$0.65

per share to stockholders of record as of

May 18, 2020.

As a result of the rights offering, the Company issued

19,500,000

new shares of common stock.  On

June 29, 2020,

the Company used

$4.75

million of the proceeds of the rights offering to purchase additional HC Realty Series B Stock.  The Company intends to use the remaining proceeds of the Rights Offering to provide additional cash for acquisitions, which

may

include purchasing additional HC Series B Stock, HC Common Stock or debt of HC Realty.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash

We consider all highly liquid investments with a maturity of

three

months or less when purchased to be cash equivalents. 

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Restricted Cash

Restricted cash includes collateral deposits required under the Company's letter of credit agreement, which expires in

June 2021,

to guarantee the Company's workers compensation insurance policy. The restricted cash balance is expected to mature over the next

six

months. As of

December 31, 2020,

there was

no

outstanding balance on the letter of credit agreement.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risk

The Company place its cash and restricted cash with financial institutions and, at times, cash held in depository accounts

may

exceed the Federal Deposit Insurance Corporation insured limit.

Revenue Recognition, Interest [Policy Text Block]

Interest Income

Interest income is recorded on an accrual basis based on the effective interest rate method and includes the accretion of fair value adjustments/discounts. Fair value adjustments to par value are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of fair value adjustments, if any.

Other revenues are recognized when contractual obligations are fulfilled or as services are provided.

Payment-In-Kind Interest, Policy [Policy Text Block]

Payment-in-Kind Interest

The Company has subordinated secured notes receivables that

may

contain payment-in-kind (“PIK”) provisions. The PIK interest, computed at the contractual rate specified in the loan agreement, is added to the principal balance of the loan and recorded as interest income.

Consolidation, Variable Interest Entity, Policy [Policy Text Block]

Variable Interest Entities

As a result of both the Asset Sale and the S&L Asset Sale, we have a variable interest in

three

entities that have been determined to be variable interest entities ("VIE"). If we conclude that we are the primary beneficiary of a VIE, we are required to consolidate it. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of significant activities and an assessment of our ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding, financing, and other applicable agreements and circumstances. Our assessments of whether we are the primary beneficiary of our VIE requires significant assumptions and judgments. We have concluded that we are

not

the primary beneficiary of the

three

VIEs as we do

not

have the power to direct the activities that most significantly impact the VIEs' economic performance and therefore are

not

required to consolidate these entities.

Subordinated Notes Receivable, Policy [Policy Text Block]

Subordinated

Note

s

Receivable

In accordance with ASC

810

-

40

-

5,

upon the sale of substantially all of the assets the Company recorded a gain on the deconsolidation of a group of assets based on the difference between the fair value of the consideration received and the carrying amount of the group of assets. As the Original Note was part of the consideration received, the Company recorded the Original Note at its fair value on

March 2, 2018.

The fair value of the Original Note was estimated using discounted cash flow analyses, using market rates at the acquisition date that reflect the credit and inherent rate-risk inherent in the Original Note. The discount resulting from the fair value adjustment was recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method. As of the date of the assignment and transfer from the Buyer to S&L, it was determined that the Original Note was extinguished and therefore both the A&R Note and the S&L Note were measured based on their fair value in accordance with Emerging Issues Task Force (EITF) –

Creditors Accounting for Modification or Exchange of Debt Instruments.

  The discounts resulting from the fair value adjustments for the A&R Note and the S&L Note were recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method.  When impairment is determined to be probable, the measurement will be based on the fair value of the collateral securing the notes.  The determination of impairment involves management's judgment and the use of market and

third

-party estimates regarding collateral values.  During

2020

management determined that S&L Note was other than temporarily impaired and recorded an impairment loss of

$833,000.

Property, Plant and Equipment, Policy [Policy Text Block]

Property, Plant and Equipment

Depreciation of property, plant and equipment is computed using the straight-line method based upon the estimated useful lives. Depreciation expense is charged to general and administrative expenses. Gains and losses related to dispositions and retirements are included in income. Maintenance and repairs are charged to expense as incurred; renewals and betterments are capitalized. Assets are reviewed for possible impairment when events indicate that the carrying amount of an asset

may

not

be recoverable. Assumptions and estimates used in the evaluation of impairment

may

affect the carrying value of property, plant and equipment, which could result in impairment charges in future periods. Our depreciation policy reflects judgments on the estimated useful lives of assets. Our long-lived assets were tested for impairment at

December 31, 2020

and determined that the long-lived assets were

not

impaired.

Cost Method Investments, Policy [Policy Text Block]

Equity Investments

Long-term investments consist of investments in equity securities where our ownership is less than

50%

and the Company has the ability to exercise significant influence, but

not

control, over the investee.  These investments are classified in “Investment in affiliate” on the balance sheets.  Investments accounted for under the equity method of accounting are initially recorded at cost and subsequently increases or decreases the investment by its proportionate share of the net income or loss and other comprehensive income or loss of the investee. For investments that do

not

have a readily determinable fair value, the Company made an accounting policy election for a measurement alternative.   Upon adoption of ASU

2016

-

01,

the Company carries these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transaction for the identical or a similar investment of the same issuer. The Company reviews its equity securities without readily determinable fair values on a regular basis to determine if the investment is impaired. For purposes of this assessment, the Company considers the investee's cash position, liquidity, earnings and revenue outlook, equity position, and ownership, among other factors, in its review.  If management's assessment indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes in current earnings an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount.

Income Tax, Policy [Policy Text Block]

Income Taxes

Deferred income taxes are determined based on the difference between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.  Deferred tax expense represents the change in the deferred tax asset/liability balance. Income tax credits are reported as a reduction of income tax expense in the year in which the credits are generated.  A valuation allowance is recorded when it is more likely than

not

that a deferred tax asset will

not

be realized.  Interest and penalties on uncertain tax positions are recorded as income tax expense.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value of Financial Instruments

Accounting for fair value measurements requires disclosure of the level within the fair value hierarchy in which fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level

1

), significant other observable inputs (Level

2

), and significant unobservable inputs (Level

3

). The fair value of receivables and payables approximate the carrying amount because of the short maturity of these instruments.

Earnings Per Share, Policy [Policy Text Block]

Earnings per Common Share

Basic earnings per share is computed based on the weighted average number of common shares outstanding. Diluted earnings per share includes any dilutive effect of outstanding stock options and restricted stock calculated using the treasury stock method.

Share-based Payment Arrangement [Policy Text Block]

Stock-Based Compensation

We record share-based payment awards at fair value on the grant date of the awards, based on the estimated number of awards that are expected to vest, over the vesting period. The fair value of stock options was determined using the Black-Scholes option-pricing model. The fair value of the restricted stock awards was based on the closing price of the Company's common stock on the date of the grant. For awards with performance conditions, we recognize compensation cost over the expected period to achieve the performance conditions, provided achievement of the performance conditions are deemed probable.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Changes in such estimates

may

affect amounts reported in future periods.

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements

In

June 2016,

the Financial Accounting Standards Board (“FASB”) issued ASU

2016

-

13,

Financial Instruments – Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments

(“ASU

2016

-

13”

).  The amendments in ASU

2016

-

13

require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  In addition, ASU

2016

-

13

amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.  The amendment is effective for public entities for annual reporting periods beginning after

December 15, 2022,

however early application is permitted for reporting periods beginning after

December 15, 2018. 

The Company does

not

anticipate the adoption of ASU

2016

-

13

to have a material impact to the financial statements.

XML

Note 2 - Property, Plant and Equipment (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Property, Plant and Equipment [Table Text Block]

	Depreciable
	lives			(in thousands)
	(in years)			2020		201 9
Computers and equipment	3	to	7	$	10	$	7
Furniture and fixtures	5	to	7		3		3
Property, plant and equipment, at cost					13		10
Less accumulated depreciation					6		3
Property, plant and equipment, net				$	7	$	7

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Note 3 - Subordinated Notes Receivable (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	Principal			Discount			Balance
Balance at January 1, 2019	$	3,376		$	(1,012	)	$	2,364
Principal payments		(812	)		-			(812	)
Impairment		-			(897	)		(897	)
Accretion of discount		-			54			54
Balance at December 31, 2019	$	2,564		$	(1,855	)	$	709
Interest paid-in-kind		25			-			25
Gain on settlement of debt		(529	)		1,855			1,326
Principal payments		(2,060	)		-			(2,060	)
Balance at December 31, 2020	$	-		$	-		$	-

	Principal			Discount			Balance
Balance at January 1, 2019	$	4,340		$	(822	)	$	3,518
Principal payments		(1,011	)		-			(1,011	)
Accretion of discount		-			163			163
Balance at December 31, 2019	$	3,329		$	(659	)	$	2,670
Principal payments		(58	)		-			(58	)
Accretion of discount		-			104			104
Impairment		-			(833	)		(833	)
Balance at December 31, 2020	$	3,271		$	(1,388	)	$	1,883

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Note 5 - Investment in Affiliate (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Equity Method Investments [Table Text Block]

	Ownership %						Investment in Affiliate Balance				Loss recorded in the Consolidated Statements of Operations (b)
	December 31, 2020			December 31, 2019			December 31, 2020		December 31, 2019		2020			2019
HC Realty Series B Stock (a)		28.7	%		7.9	%	$	10,250	$	2,000	$	-		$	-
HC Realty common stock		7.7	%		8.5	%		1,822		2,405		(418	)		(430	)
Total		36.4	%		16.4	%	$	12,072	$	4,405	$	(418	)	$	(430	)

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Note 6 - Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	20 20			2019
Current:
Federal	$	(247	)	$	-
State		-			(84	)
Total current		(247	)		(84	)
Deferred:
Federal		247			-
State		-			-
Total deferred		247			-
Income tax (benefit) expense from continuing operations	$	-		$	(84	)

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	2020			2019
Federal statutory rate		21.0	%		21.0	%
State tax, net of federal benefit		(0.1	)		3.8
Deferred correction – State NOLs		(359.7	)		(122.7	)
Permanent differences		2.3			-
Valuation allowance increase		360.4			(3.9	)
Other, net		(24.0	)		4.3
Effective income tax rate		-	%		(97.6	)%

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	2020			2019
Noncurrent deferred tax assets:
Equity method investment	$	195		$	99
Other accrued expenses		33			32
Notes receivable fair value adjustment		319			578
Employee benefits		50			65
Capital loss carryforward		11			-
AMT credit		-			247
Net operating loss		7,861			7,726
Gross non-current deferred tax assets		8,469			8,747
Noncurrent deferred tax liabilities:
Property, tax, and equipment	$	(1	)	$	(1	)
Non-taxable dividends		(193	)		-
Valuation allowance		(8,275	)		(8,499	)
Gross non-current deferred tax liabilities		(8,469	)		(8,500	)
Net noncurrent deferred tax assets	$	-		$	247

Schedule of Unrecognized Tax Benefits Roll Forward [Table Text Block]

	20 20		20 19
Unrecognized tax benefits balance at January 1	$	157	$	241
Gross decrease in tax positions of prior years		-		(84	)
Unrecognized tax benefits balance at December 31	$	157	$	157

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Note 7 - Stockholders' Equity (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	20 20		2019
Weighted average shares outstanding for basic calculation		25,004		14,507
Dilutive effect of restricted stock		417		430
Weighted average shares outstanding for diluted calculation		25,421		14,937

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Note 8 - Stock Based Compensation (Tables)

12 Months Ended

Dec. 31, 2020

Notes Tables

Share-based Payment Arrangement, Option, Activity [Table Text Block]

	Number of shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2019		63,197		$	7.01		1.8
Cancelled/Forfeited		(20,914	)	$	8.64
Outstanding at December 31, 2019		42,283		$	6.20		.8
Cancelled/Forfeited		(36,071	)	$	5.54
Expired		(6,212	)	$	10.01
Outstanding at December 31, 2020		-		$	-		-	$	-
Exercisable at December 31, 2020		-		$	-		-	$	-

Share-based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block]

	Number of shares			Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2019		204,575		$	0.83
Vested		(30,354	)		1.81
Granted		416,666			0.60
Cancelled/Forfeited/Expired		(161,290	)		0.62
Outstanding at December 31, 2019		429,597		$	0.61
Vested		(12,931	)		1.16
Granted		-			-
Cancelled/Forfeited /Expired		-			-
Outstanding at December 31, 20 20		416,666		$	0.60

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Note 1 - Significant Accounting Policies (Details Textual) - USD ($)						3 Months Ended	12 Months Ended
	Jun. 29, 2020	Jun. 19, 2020	Apr. 09, 2020	Apr. 03, 2020	Mar. 19, 2019	Jun. 29, 2020	Dec. 31, 2020	Dec. 31, 2019
Payments to Acquire Equity Method Investments							$ 8,250,000	$ 5,000,000
Proceeds from Issuance of Common Stock							12,675,000
Impairment of Notes Receivable							833,000	897,000
Rights Offering [Member]
Proceeds from Issuance of Common Stock		$ 12,675,000
Stock Issued During Period, Shares, New Issues (in shares)		19,500,000
Shares Issued, Price Per Share (in dollars per share)		$ 0.65
Senior Secured Term Loan [Member]
Notes Receivable, Related Parties					$ 2,000,000
Senior Secured Term Loan [Member] | The Lenders [Member]
Notes Receivable, Related Parties					$ 10,500,000
S&L Note [Member]
Impairment of Notes Receivable							$ 833,000	$ 0
HC Government Realty Trust, Inc [Member]
Ownership Percentage							36.40%
HC Government Realty Trust, Inc [Member] | Common Stock of Investee [Member]
Equity Method Investment, Shares Purchased During Period (in shares)					300,000
Equity Method Investment, Aggregate Cost					$ 3,000,000
HC Government Realty Trust, Inc [Member] | Series B Cumulative Convertible Preferred Stock [Member]
Equity Method Investment, Shares Purchased During Period (in shares)	475,000		250,000	100,000	200,000
Equity Method Investment, Aggregate Cost					$ 2,000,000		$ 10,250,000
Preferred Stock, Dividend Rate, Percentage					10.00%
Payments to Acquire Equity Method Investments	$ 4,750,000					$ 8,250,000

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Note 2 - Property, Plant and Equipment - Summary of Property, Plant and Equipment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Property, plant and equipment, gross	$ 13	$ 10
Less accumulated depreciation	6	3
Property, plant and equipment, net	7	7
Machinery and Equipment [Member]
Property, plant and equipment, gross	$ 10	7
Machinery and Equipment [Member] | Minimum [Member]
Property, plant and equipment, Depreciable Lives (Year)	3 years
Machinery and Equipment [Member] | Maximum [Member]
Property, plant and equipment, Depreciable Lives (Year)	7 years
Furniture and Fixtures [Member]
Property, plant and equipment, gross	$ 3	$ 3
Furniture and Fixtures [Member] | Minimum [Member]
Property, plant and equipment, Depreciable Lives (Year)	5 years
Furniture and Fixtures [Member] | Maximum [Member]
Property, plant and equipment, Depreciable Lives (Year)	7 years

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Note 3 - Subordinated Notes Receivable (Details Textual) - USD ($)							3 Months Ended			12 Months Ended
	Mar. 16, 2020	Mar. 13, 2020	Mar. 12, 2020	Mar. 04, 2020	Feb. 28, 2020	Jan. 31, 2020	Dec. 31, 2020	Mar. 31, 2020	Jun. 30, 2019	Dec. 31, 2020	Dec. 31, 2019	Mar. 06, 2020	Feb. 07, 2019	Dec. 31, 2018	Sep. 06, 2018	Mar. 31, 2018
Financing Receivable, after Allowance for Credit Loss, Total																$ 7,400,000
Impairment of Notes Receivable										$ 833,000	$ 897,000
Accretion (Amortization) of Discounts and Premiums, Investments										104,000	217,000
A&R Note [Member]
Financing Receivable, before Allowance for Credit Loss, Total															$ 3,300,000
Second A&R Note [Member]
Financing Receivable, after Allowance for Credit Loss, Total									$ 1,300,000		709,000			$ 2,364,000
Financing Receivable, before Allowance for Credit Loss, Total											2,564,000		$ 3,200,000	$ 3,376,000
Notes Receivable, Interest Rate													6.00%
Impairment of Notes Receivable									$ 897,000		897,000
Proceeds from Interest Received										0
Second A&R Note [Member] | Loan Parties [Member]
Proceeds from Collection of Finance Receivables	$ 392,000	$ 750,000	$ 250,000	$ 350,000	$ 200,000	$ 130,000
Gain (Loss) on Payoff of Notes Receivable								$ 1,300,000
Second Forbearance Extension Letter Agreement, Second A&R Note due March 12, 2020 [Member] | Loan Parties [Member]
Financing Receivable, before Allowance for Credit Loss, Total												$ 250,000
Second Forbearance Extension Letter Agreement, Second A&R Note due March 13, 2020 [Member] | Loan Parties [Member]
Financing Receivable, before Allowance for Credit Loss, Total												750,000
Second Forbearance Extension Letter Agreement, Second A&R Note due March 17, 2020 [Member] | Loan Parties [Member]
Financing Receivable, before Allowance for Credit Loss, Total												$ 391,970
S&L Note [Member]
Financing Receivable, after Allowance for Credit Loss, Total							1,900,000			1,900,000
Financing Receivable, before Allowance for Credit Loss, Total															$ 4,400,000
Notes Receivable, Interest Rate															10.00%
Impairment of Notes Receivable										833,000	0
Proceeds from Collection of Finance Receivables										58,000	1,011,000
Proceeds from Interest Received							$ 58,000
Interest Paid, Excluding Capitalized Interest, Operating Activities										252,000	356,000
Accretion (Amortization) of Discounts and Premiums, Investments										$ 104,000	$ 163,000

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Note 3 - Subordinated Notes Receivable - Reconciliation of the Activity (Details) - USD ($)	3 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2020	Dec. 31, 2019
Impairment		$ (833,000)	$ (897,000)
Interest paid-in-kind		(25,000)
Second A&R Note [Member]
Principal		2,564,000	3,376,000
Discount, balance		(1,855,000)	(1,012,000)
Balance		709,000	2,364,000
Principal payments, principal		(2,060,000)	(812,000)
Principal payments		(2,060,000)	(812,000)
Impairment, principal
Impairment, discount			(897,000)
Impairment	$ (897,000)		(897,000)
Accretion of discount, discount			54,000
Accretion of discount			54,000
Interest paid-in-kind, principal		25,000
Interest paid-in-kind		25,000
Gain on settlement of debt, principal		(529,000)
Gain on settlement of debt, discount		1,855,000
Gain on settlement of debt		1,326,000
Principal			2,564,000
Discount, balance			(1,855,000)
Balance	$ 1,300,000		709,000
Accretion of discount, discount			54,000
Accretion of discount			54,000
S&L Subordinated Notes Receivable [Member]
Principal		3,329,000	4,340,000
Discount, balance		(659,000)	(822,000)
Balance		2,670,000	3,518,000
Principal payments, principal		(58,000)	(1,011,000)
Principal payments		(58,000)	(1,011,000)
Impairment, discount		(833,000)
Impairment		(833,000)
Accretion of discount, discount		104,000	163,000
Accretion of discount		104,000	163,000
Principal		3,271,000	3,329,000
Discount, balance		(1,388,000)	(659,000)
Balance		1,883,000	2,670,000
Accretion of discount, discount		104,000	163,000
Accretion of discount		$ 104,000	$ 163,000

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Note 4 - Loan to Affiliate (Details Textual) - Senior Secured Term Loan [Member] - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Mar. 19, 2019
Notes Receivable, Related Parties			$ 2,000,000
Notes Receivable, Interest Rate			14.00%
Interest Income, Related Party	$ 204,000	$ 223,000
The Lenders [Member]
Notes Receivable, Related Parties			$ 10,500,000

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Note 5 - Investment in Affiliate (Details Textual) - USD ($)					3 Months Ended	12 Months Ended
	Jun. 29, 2020	Apr. 09, 2020	Apr. 03, 2020	Mar. 19, 2019	Jun. 29, 2020	Dec. 31, 2020	Dec. 31, 2019
Payments to Acquire Equity Method Investments						$ 8,250,000	$ 5,000,000
HC Government Realty Trust, Inc [Member] | Series B Cumulative Convertible Preferred Stock [Member]
Equity Method Investment, Shares Purchased During Period (in shares)	475,000	250,000	100,000	200,000
Preferred Stock, Dividend Rate, Percentage				10.00%
Equity Method Investment, Aggregate Cost				$ 2,000,000		$ 10,250,000
Payments to Acquire Equity Method Investments	$ 4,750,000				$ 8,250,000
Convertible Preferred Stock of Investee, Shares Issued Upon Conversion (in shares)						1
Convertible Preferred Stock, Maximum Conversion Price (in dollars per share)						$ 9.10
HC Government Realty Trust, Inc [Member] | Series B Cumulative Convertible Preferred Stock [Member] | Investors Affiliated with the Hale Partnership [Member]
Equity Method Investment, Aggregate Cost				$ 8,500,000
HC Government Realty Trust, Inc [Member] | Common Stock of Investee [Member]
Equity Method Investment, Shares Purchased During Period (in shares)				300,000
Equity Method Investment, Aggregate Cost				$ 3,000,000
HC Government Realty Trust, Inc [Member] | Common Stock of Investee [Member] | Investors Affiliated with the Hale Partnership [Member]
Equity Method Investment, Shares Purchased During Period (in shares)				850,000

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Note 5 - Investment in Affiliate - Equity Method Investments (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2020	Dec. 31, 2019
Investment in affiliate, balance		$ 12,072	$ 4,405
Loss recorded in the Consolidated Statements of Operations		$ (418)	$ (430)
HC Government Realty Trust, Inc [Member]
Equity Method Investment, Ownership Percentage		36.40%	16.40%
Investment in affiliate, balance		$ 12,072	$ 4,405
Loss recorded in the Consolidated Statements of Operations	[1]	$ (418)	$ (430)
HC Government Realty Trust, Inc [Member] | Series B Cumulative Convertible Preferred Stock [Member]
Equity Method Investment, Ownership Percentage	[2]	28.70%	7.90%
Investment in affiliate, balance	[2]	$ 10,250	$ 2,000
Loss recorded in the Consolidated Statements of Operations	[1],[2]
HC Government Realty Trust, Inc [Member] | Common Stock of Investee [Member]
Equity Method Investment, Ownership Percentage		7.70%	8.50%
Investment in affiliate, balance		$ 1,822	$ 2,405
Loss recorded in the Consolidated Statements of Operations	[1]	$ (418)	$ (430)

[1] Loss from these investments is included in "Loss from affiliate" in the statements of operations. Since HC Realty is a Real Estate Investment Trust and not a taxable entity, the loss is not reported net of taxes.

[2] Represents investments in shares of HC Realty preferred stock with a basis of $10.25 million. Each share of preferred stock can be converted into one share of HC Realty common stock at a conversion price equal to the lesser of $9.10 per share or the fair market value per share of HC Realty common stock, subject to adjustment upon the occurrence of certain events.

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Note 6 - Income Taxes (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount	$ 226,000
Unrecognized Tax Benefits, Interest on Income Taxes Accrued	$ 157,000	$ 157,000
Open Tax Year	2013 2014 2015 2016 2017 2018 2019
Domestic Tax Authority [Member]
Operating Loss Carryforwards, Total	$ 35,300,000
State and Local Jurisdiction [Member]
Operating Loss Carryforwards, Total	$ 22,500,000

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Note 6 - Income Taxes - Provision for Income Tax Expense (Benefit) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Current:
Federal	$ (247)
State		(84)
Total current	(247)	(84)
Deferred:
Federal	247
State
Total deferred	247
Income tax (benefit) expense from continuing operations		$ (84)

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Note 6 - Income Taxes - Reconciliation of Effective Income Tax Rate (Details)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Federal statutory rate	21.00%	21.00%
State tax, net of federal benefit	(0.10%)	3.80%
Deferred correction – State NOLs	(359.70%)	(122.70%)
Permanent differences	2.30%
Valuation allowance increase	360.40%	(3.90%)
Other, net	(24.00%)	4.30%
Effective income tax rate		(97.60%)

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Note 6 - Income Taxes - Income Tax Effects of Temporary Differences That Comprise Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Noncurrent deferred tax assets:
Equity method investment	$ 195	$ 99
Other accrued expenses	33	32
Notes receivable fair value adjustment	319	578
Employee benefits	50	65
Capital loss carryforward	11
AMT credit		247
Net operating loss	7,861	7,726
Gross non-current deferred tax assets	8,469	8,747
Property, tax, and equipment	(1)	(1)
Non-taxable dividends	(193)
Valuation allowance	(8,275)	(8,499)
Gross non-current deferred tax liabilities	(8,469)	(8,500)
Net noncurrent deferred tax assets		$ 247

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Note 6 - Income Taxes - Unrecognized Tax Benefits Activity (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Unrecognized tax benefits balance at January 1	$ 157	$ 241
Gross decrease in tax positions of prior years		(84)
Unrecognized tax benefits balance at December 31	$ 157	$ 157

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Note 7 - Stockholders' Equity (Details Textual) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2016	Jul. 31, 2012
Excess Stock, Shares Authorized (in shares)	1,000,000
Preferred Stock, Shares Outstanding, Ending Balance (in shares)	0	0
Minimum [Member]
Equity Method Investment, Ownership Percentage			4.90%
Privately Negotiated Transaction [Member] | Common Stock [Member]
Stock Repurchase Program, Authorized Amount				$ 5
Stock Repurchased During Period, Shares (in shares)	0	0
Restricted Stock [Member]
Share-based Payment Arrangement, Shares Withheld for Tax Withholding Obligation (in shares)	0	0
Share-based Payment Arrangement, Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)	0	42,000

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Note 7 - Stockholders' Equity - Basic and Diluted Earnings Per Share Calculation (Details) - shares shares in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Weighted average shares outstanding for basic calculation (in shares)	25,004	14,507
Dilutive effect of restricted stock (in shares)	417	430
Weighted average shares outstanding for diluted calculation (in shares)	25,421	14,937

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Note 8 - Stock Based Compensation (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures, Total (in shares)	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period (in shares)	0	0
Share-based Payment Arrangement, Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	10 years
Share-based Payment Arrangement, Option [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	1 year
Share-based Payment Arrangement, Option [Member] | Minimum [Member] | Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	4 years
Share-based Payment Arrangement, Option [Member] | Maximum [Member] | Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	5 years
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period (in shares)	12,931	30,354
Share-based Payment Arrangement, Nonvested Award, Excluding Option, Cost Not yet Recognized, Amount	$ 124,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)	1 year 182 days
A 2012 Incentive Compensation Plan [Member] | Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)	1,600,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)	1,200,000

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Note 8 - Stock Based Compensation - Summary of Stock Option Activity (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Outstanding, shares (in shares)	42,283	63,197
Outstanding, weighted-average exercise price (in dollars per share)	$ 6.20	$ 7.01
Outstanding, weighted-average remaining contractual term (Year)		292 days	1 year 292 days
Cancelled/Forfeited, shares (in shares)	(36,071)	(20,914)
Cancelled/Forfeited, weighted-average exercise price (in dollars per share)	$ 5.54	$ 8.64
Expired, shares (in shares)	(6,212)
Expired, weighted-average exercise price (in dollars per share)	$ 10.01
Outstanding, shares (in shares)		42,283	63,197
Outstanding, weighted-average exercise price (in dollars per share)		$ 6.20	$ 7.01
Outstanding, aggregate intrinsic value
Exercisable, shares (in shares)
Exercisable, weighted-average exercise price (in dollars per share)
Exercisable, weighted-average remaining contractual term (Year)
Exercisable, aggregate intrinsic value

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Note 8 - Stock Based Compensation - Summary of Restricted Stock (Details) - Restricted Stock [Member] - $ / shares	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Outstanding (in shares)	429,597	204,575
Outstanding, weighted average grant date fair value (in dollars per share)	$ 0.61	$ 0.83
Vested (in shares)	(12,931)	(30,354)
Vested, weighted average grant date fair value (in dollars per share)	$ 1.16	$ 1.81
Granted (in shares)		416,666
Granted, weighted average grant date fair value (in dollars per share)		$ 0.60
Cancelled/Forfeited/Expired (in shares)		(161,290)
Cancelled/Forfeited/Expired, weighted average grant date fair value (in dollars per share)		$ 0.62
Granted (in shares)
Outstanding (in shares)	416,666	429,597
Outstanding, weighted average grant date fair value (in dollars per share)	$ 0.60	$ 0.61

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Note 9 - Income for Continued Dumping and Subsidy Offset Act (CDSOA) (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Income from Continued Dumping and Subsidy Offset Act, Net	$ 0	$ 1,230

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Note 10 - Commitments and Contingencies (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Letters of Credit Outstanding, Amount	$ 230,000
Office Space [Member]
Operating Lease, Expense	$ 29,000	$ 29,000

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Note 11 - Uncertainties (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Impairment of Notes Receivable	$ 833,000	$ 897,000
S&L Note [Member]
Impairment of Notes Receivable	833,000	$ 0
S&L Note [Member] | COVID 19 [Member]
Impairment of Notes Receivable	$ 833,000